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Trade Liberalization and New Exporters' Size: A Test of Heterogeneous Firm Models

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  • Marinov Rosen

    ()
    (Graduate Institute of International Studies)

  • Rocha Nadia

    ()
    (Graduate Institute of International Studies)

  • DiNino Virginia

    ()
    (Graduate Institute of International Studies)

Abstract

This paper tests an empirical implication of heterogeneous firm models along the lines of Melitz (2003) in the context of falling trade costs. Using the EU's intensive liberalization phase (1993-2002) as a natural experiment, we investigate freer trade's impact on the frequency of market reorientation across the productivity distribution of active firms to shed light on the presence of a minimum productivity (size) threshold for profitable sales abroad. Contrary to the models' predictions, firms that switch from non-exporting to exporting over the studied period are not concentrated in a particular size range. Our findings, based on a rich data set of French manufacturing enterprises, suggest a scope for fine-tuning of the theoretical framework.

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Bibliographic Info

Article provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.

Volume (Year): 8 (2008)
Issue (Month): 1 (May)
Pages: 1-14

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Handle: RePEc:bpj:bejeap:v:8:y:2008:i:1:n:10

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Cited by:
  1. Matthew A. Cole & Robert J. R. Elliott & Supreeya Virakul, 2010. "Firm Heterogeneity, Origin of Ownership and Export Participation," The World Economy, Wiley Blackwell, vol. 33(2), pages 264-291, 02.

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