Abstract
This paper challenges the common assumption of market segmentation in international trade. To analyze export entry and pricing decisions of firms in integrated vs. segmented markets, we develop a novel tractable approach based on stochastic export costs that allows us to compare firm-level and aggregate outcomes under arbitrary market interdependence. We find that allowing for potential re-exporting arbitrage between countries imposes constraints on export prices of firms and has first-order implications for trade and welfare.
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