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Abstract

The paper investigates how the overseas activity of multinational retailers (MRs) affects the global export patters of host country firms. Recent empirical work testifies that the entry of foreign retailers leads to a productivity upgrade in the domestic upstream sectors. Combined with the main result of the new new international trade theory on firm heterogeneity, an increase in the export capacity of local firms should follow. The current paper establishes a connection between these empirically identified effects and the new theory of international trade with heterogeneous firms and intermediaries. Two mechanisms are analyzed. First, the higher productivity at industry and firm level leads to an increase in the overall export capacity of local firms. Second, the expansion of transnational retail networks reinforces trade between host countries.

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