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Firm heterogeneity and international trade: A cross-country analysis within the EU

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  • Claire Giordano
  • Paloma Lopez-Garcia

Abstract

By exploiting cross-country micro-aggregated CompNet data, this study investigates the main implications of firm heterogeneity for international trade of EU countries, distinguishing between old and new Member States. On the one hand, exporting firms are larger, more productive and pay higher wages than non-exporting firms, especially in new EU economies. Only the former firms are indeed able to bear export costs, which are higher in new EU countries and are related to various factors, such as the quality of the legal system, the restrictiveness of labour-market regulation and the degree of access to finance. Hence, only few enterprises actually export, and the intensity of aggregate export concentration within few firms varies across countries and sectors. On the other hand, opening to trade boosts individual firms’ productivity, via a number of channels (including GVC integration, which is particularly important for new EU countries), and also enhances allocative efficiency across firms, in turn increasing aggregate productivity growth. One of the main standard determinants of export growth, namely changes in the real effective exchange rate, impacts aggregate performance differently across countries and sectors, depending on sectoral composition and on firm characteristics, in both old and new Member States.

Suggested Citation

  • Claire Giordano & Paloma Lopez-Garcia, 2021. "Firm heterogeneity and international trade: A cross-country analysis within the EU," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 30(1), pages 68-103, January.
    • Handle: RePEc:taf:jitecd:v:30:y:2021:i:1:p:68-103
    DOI: 10.1080/09638199.2020.1788123
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    References listed on IDEAS

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    1. Petia Topalova & Amit Khandelwal, 2011. "Trade Liberalization and Firm Productivity: The Case of India," The Review of Economics and Statistics, MIT Press, vol. 93(3), pages 995-1009, August.
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    Cited by:

    1. Frohm, Erik, 2023. "Dominant currencies and the export supply channel," International Economics, Elsevier, vol. 173(C), pages 1-18.
    2. Giordano, Claire & Lopez-Garcia, Paloma, 2019. "Firm heterogeneity and trade in EU countries: a cross-country analysis," Occasional Paper Series 225, European Central Bank.
    3. Gloria Allione & Claire Giordano, 2023. "Are the Happy Few still happy? Exporter heterogeneity during the COVID-19 pandemic in Italy," Questioni di Economia e Finanza (Occasional Papers) 816, Bank of Italy, Economic Research and International Relations Area.
    4. Alberto Felettigh & Claire Giordano, 2018. "Rethinking prices and markets underlying price-competitiveness indicators," Questioni di Economia e Finanza (Occasional Papers) 447, Bank of Italy, Economic Research and International Relations Area.
    5. Mercè Sala-Ríos & Mariona Farré-Perdiguer & Teresa Torres-Solé, 2020. "Exporting and Firms’ Performance—What about Cooperatives? Evidence from Spain," Sustainability, MDPI, vol. 12(20), pages 1-22, October.

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    More about this item

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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