Theoretical analysis based on models of growth and trade with heterogeneous firms

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(1) A new model of international trade and economic growth with heterogeneous firms was built (2) An ex ante distribution of firm productivity is endogenized. This contrasts with the existing studies where the ex-ante distribution is treated exogenously. (3) Trade liberalization expands the exporting industries and shrinks the non-exporting industries. Although this result is reported in the literature, it is important to establish that the same result holds in a quality-ladder model. (4) Trade liberalization unambiguously promotes technical progress and consumption growth. (5) Social welfare increases due to trade liberalization if the size of the market is sufficiently large or the rate of time preference of the representative consumer is sufficiently small. (6) R&D subsidies do not necessarily expand the exporting industries. Similarly, the industrial policy does not necessarily promote technical progress. (7) The above basic results hold in the model without "scale effects" in the presence of population growth. (8) This research project led to other areas of research.