Abstract
Industry reallocations in a globalizing economy - We present the main insights from recent developments in New Trade Theory (NTT) on firms’ responses to globalisation and their implications for the reallocation of resources across firms and countries. In so doing, we do not want to propose a survey of the major contributions to NTT. We prefer, instead, to propose a simple twocountry partial equilibrium model that highlights the key features of NTT while bypassing most of its complexities. Both exports and foreign direct investment (henceforth, FDI) are considered, which makes the model also a useful pedagogical tool. Keywords: international integration; resource reallocation; economic geography; firm heterogeneity; multinationals. JEL Classification: F12