HKUIn February 2016, Matthieu Crozet visited the Faculty of Business and Economics of the University of Hong Kong (HKU). He presented a paper, co-authored with Federico Trionfetti, titled “Firm-Level Comparative Advantages”.
This paper studies the consequences of heterogeneity in factor intensity on firm performance. It presents a standard Heckscher-Ohlin model augmented with factor intensity differences across firms within a country industry pair. The model shows that for any two firms, each of whose capital intensity is, for instance, one percent above (below) its respective country-industry average, the relative marginal cost of the firm in the capital-intensive industry of the capital-abundant country is lower (higher) than that of the other firm. The empirical analysis, conducted using data for a large panel of European firms, supports this prediction. These results provide a novel approach to the verification of the Heckscher-Ohlin theory and new evidence on its validity.