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The Comparative Advantage of Firms

Author

Listed:
  • Johannes Boehm

    (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, CEP - LSE - Centre for Economic Performance - LSE - London School of Economics and Political Science)

  • Swati Dhingra

    (CEP - LSE - Centre for Economic Performance - LSE - London School of Economics and Political Science, CEPR - Center for Economic Policy Research)

  • John Morrow

    (King‘s College London, CEP - LSE - Centre for Economic Performance - LSE - London School of Economics and Political Science, CEPR - Center for Economic Policy Research)

Abstract
Resource-based theories propose that firms grow by diversifying into products that use common capabilities. We provide evidence for common-input capabilities, using a policy that removed entry barriers in input markets to show that the similarity of a firm's and an industry's input mix determines firm production choices. We model industry choice and economies of scope from input capabilities. When the model is estimated for Indian manufacturing, input complementarities make firms 5% more likely to produce in an industry and are quantitatively as important as time-invariant drivers of coproduction rates. Upstream entry barriers were equivalent to a 9.5% tariff on inputs.

Suggested Citation

  • Johannes Boehm & Swati Dhingra & John Morrow, 2021. "The Comparative Advantage of Firms," SciencePo Working papers Main hal-03877257, HAL.
  • Handle: RePEc:hal:spmain:hal-03877257
    DOI: 10.1086/720630
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03877257
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    More about this item

    Keywords

    Multiproduct firms; firm capabilities; vertical input linkages; comparative advantage; economies of scope; size-based policies;
    All these keywords.

    JEL classification:

    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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