|market size, structure, and access trade with capacity constraints|
ABSTRAK: This paper develops a model of international trade where ﬁrms are heterogeneous across capac-
ity and productivity. A binding capacity constraint induces ﬁrms to raise prices in order to take advantage of access to new markets. This generates markets with a ﬂexible competitive structure giving rise to instances where trade and trade liberalization negatively impact welfare. The key predictions of my model can be identiﬁed by observing the presence of small yet highly productive ﬁrms, and substitution by ﬁrms across markets as accessibility evolves. Using Thai ﬁrm-level data I establish the prevalence of these anomalous ﬁrms, and demonstrate they face capacity constraints.
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