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Firm level export decisions: The role of information cost

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  • Wei, Xuan
  • Thornsbury, Suzanne
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    Abstract

    Costs necessary to conform with rules and regulations governing market access (i.e. compliance costs) are uncertain prior to export or collection of information which is not cost free for an individual firm. In this paper, we extend the heterogeneous firm model of Melitz to analyze how an individual firm may reduce or eliminate the uncertainty of compliance costs by paying for the information cost prior to making decisions to export. Our model indicates that in the presence of uncertain compliance costs and non-zero information cost, average profits and productivity differences between exporting and non-exporting firms are reduced.

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    Bibliographic Info

    Article provided by Elsevier in its journal Economics Letters.

    Volume (Year): 116 (2012)
    Issue (Month): 3 ()
    Pages: 487-490

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    Handle: RePEc:eee:ecolet:v:116:y:2012:i:3:p:487-490

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    Web page: http://www.elsevier.com/locate/ecolet

    Related research

    Keywords: Information cost; Uncertainty; Compliance costs; Export decisions; Profit; Productivity;

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    1. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Boston College Working Papers in Economics 593, Boston College Department of Economics.
    2. Mark J. Melitz, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," NBER Working Papers 8881, National Bureau of Economic Research, Inc.
    3. Thornsbury, Suzanne & Roberts, Donna & Orden, David, 2004. "Measurement and Political Economy of Disputed Technical Regulations," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 36(03), December.
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