Advanced Search
MyIDEAS: Login to save this paper or follow this series

Firm Exit, Technological Progress and Trade

Contents:

Author Info

  • Philipp J.H. Schröder

    (Department of Economics and Business, Aarhus University, Denmark)

  • Allan Sørensen

    ()
    (Department of Economics and Business, Aarhus University, Denmark)

Abstract

The dynamics of export market exit and firm closure have found limited attention in the new heterogeneous-firms trade literature. In fact, several of the predictions on firm survival and exit stemming from this new class of models are at odds with the stylized facts. Empirically, higher productivity firms survive longer, most firm closures are young firms, higher productivity exporters are more likely to continue to export compared to less productive exporters and market exits as well as firm closures are typically preceded by periods of contracting market shares. The present paper shows that the simple inclusion of exogenous economy wide technological progress into the standard Melitz (2003) model generates a tractable dynamic framework that generates endogenous exit decisions of firms in line with the stylized facts. Furthermore, we derive the effects of faster technological progress and trade liberalization on export market exit and firm closure.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: ftp://ftp.econ.au.dk/afn/wp/11/wp11_17.pdf
Download Restriction: no

Bibliographic Info

Paper provided by School of Economics and Management, University of Aarhus in its series Economics Working Papers with number 2011-17.

as in new window
Length: 31
Date of creation: 20 Dec 2011
Date of revision:
Handle: RePEc:aah:aarhec:2011-17

Contact details of provider:
Web page: http://www.econ.au.dk/afn/

Related research

Keywords: Intra-industry trade; entry/exit; monopolistic competition; heterogeneous firms; technological change;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Costas Arkolakis, 2009. "A Unified Theory of Firm Selection and Growth," CESifo Working Paper Series 2679, CESifo Group Munich.
  2. Diego Comin & Bart Hobijn & Emilie Rovito, 2008. "Technology usage lags," Journal of Economic Growth, Springer, vol. 13(4), pages 237-256, December.
  3. Italo Colantone & Leo Sleuwaegen, 2010. "International trade, exit and entry: A cross-country and industry analysis," Journal of International Business Studies, Palgrave Macmillan, vol. 41(7), pages 1240-1257, September.
  4. Raouf Boucekkine & David de la Croix and Omar Licandro, 2011. "Vintage Capital Growth Theory: Three Breakthroughs," Working Papers 565, Barcelona Graduate School of Economics.
  5. Yeaple, Stephen & Helpman, Elhanan & Melitz, Marc, 2004. "Export versus FDI with Heterogeneous Firms," Scholarly Articles 3229098, Harvard University Department of Economics.
  6. Joachim Wagner, 2005. "Exports and Productivity: A Survey of the Evidence fro Firm Level Data," International Trade 0504005, EconWPA.
  7. Lucia Foster & John C. Haltiwanger & C. J. Krizan, 2001. "Aggregate Productivity Growth. Lessons from Microeconomic Evidence," NBER Chapters, in: New Developments in Productivity Analysis, pages 303-372 National Bureau of Economic Research, Inc.
  8. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
  9. Raouf Boucekkine & Omar Licandro & Luis A. Puch & Fernando del Rio, . "Vintage capital and the dynamics of the AK model," Working Papers 2000-01, FEDEA.
  10. Raouf BOUCEKKINE & Fernando DEL RIO & Omar LICANDRO, 2002. "Embodied technological change learning-by-doing and the productivity slowdown," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2002028, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  11. Baldwin, Richard & Robert-Nicoud, Frédéric, 2006. "Trade and Growth with Heterogenous Firms," CEPR Discussion Papers 5563, C.E.P.R. Discussion Papers.
  12. Jonathan Eaton & Samuel Kortum, 2004. "An Anatomy of International Trade: Evidence from French Firms," 2004 Meeting Papers 802, Society for Economic Dynamics.
  13. Josh Ederington & Phillip McCalman, 2009. "International Trade And Industrial Dynamics," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(3), pages 961-989, 08.
  14. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
  15. Raouf, BOUCEKKINE & David, DE LA CROIX & Omar, LICANDRO, 2006. "Vintage Capital," Discussion Papers (ECON - Département des Sciences Economiques) 2006014, Université catholique de Louvain, Département des Sciences Economiques.
  16. Ghironi, Fabio & Melitz, Marc J, 2004. "International Trade and Macroeconomic Dynamics with Heteroegenous Firms," CEPR Discussion Papers 4595, C.E.P.R. Discussion Papers.
  17. Steven Klepper, 2002. "Firm Survival and the Evolution of Oligopoly," RAND Journal of Economics, The RAND Corporation, vol. 33(1), pages 37-61, Spring.
  18. Diego Comin & Bart Hobijn, 2010. "An Exploration of Technology Diffusion," American Economic Review, American Economic Association, vol. 100(5), pages 2031-59, December.
  19. Ariel Burstein & Andrew Atkeson, 2009. "Innovation, Firm Dynamics, and International Trade," 2009 Meeting Papers 186, Society for Economic Dynamics.
  20. David Greenaway & Richard Kneller, 2007. "Firm heterogeneity, exporting and foreign direct investment," Economic Journal, Royal Economic Society, vol. 117(517), pages F134-F161, 02.
  21. Kim J. Ruhl, 2008. "The International Elasticity Puzzle," Working Papers 08-30, New York University, Leonard N. Stern School of Business, Department of Economics.
  22. Erzo G. J. Luttmer, 2007. "Selection, Growth, and the Size Distribution of Firms," The Quarterly Journal of Economics, MIT Press, vol. 122(3), pages 1103-1144, 08.
  23. George Alessandria & Horag Choi, 2011. "Establishment heterogeneity, exporter dynamics, and the effects of trade liberalization," Working Papers 11-19, Federal Reserve Bank of Philadelphia.
  24. Richard E. Caves, 1998. "Industrial Organization and New Findings on the Turnover and Mobility of Firms," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 1947-1982, December.
  25. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-97, November.
  26. Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, vol. 60(5), pages 1127-50, September.
  27. Diego A. Comin & Martí Mestieri, 2010. "An Intensive Exploration of Technology Diffusion," NBER Working Papers 16379, National Bureau of Economic Research, Inc.
  28. Greenaway, David & Kneller, Richard, 2008. "Exporting, productivity and agglomeration," European Economic Review, Elsevier, vol. 52(5), pages 919-939, July.
  29. Alfonso A. Irarrazabal & Luca David Opromolla, 2008. "A Theory of Entry and Exit into Exports Markets," Working Papers w200820, Banco de Portugal, Economics and Research Department.
  30. Giammario Impullitti & Omar Licandro, 2010. "Trade, Firm Selection, and Innovation: the Competition Channel," Working Papers 495, Barcelona Graduate School of Economics.
  31. Pflüger, Michael P. & Russek, Stephan, 2011. "Business Conditions and Default Risks across Countries," IZA Discussion Papers 5541, Institute for the Study of Labor (IZA).
  32. Dasgupta, Partha & Stiglitz, Joseph, 1981. "Entry, innovation, exit : Towards a dynamic theory of oligopolistic industrial structure," European Economic Review, Elsevier, vol. 15(2), pages 137-158.
  33. Tetsugen Haruyama & Laixun Zhao, 2008. "Trade and Firm Heterogeneity In A Quality-Ladder Model of Growth," Discussion Paper Series 223, Research Institute for Economics & Business Administration, Kobe University.
  34. Jeffrey Campbell, 1998. "Entry, Exit, Embodied Technology, and Business Cycles," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(2), pages 371-408, April.
  35. Ariel Burstein & Marc J. Melitz, 2011. "Trade Liberalization and Firm Dynamics," NBER Working Papers 16960, National Bureau of Economic Research, Inc.
  36. Alain Gabler & Omar Licandro, 2007. "Endogenous Growth through Selection and Imitation," Economics Working Papers ECO2007/26, European University Institute.
  37. Fariñas, Jose C. & Ruano, Sonia, 2005. "Firm productivity, heterogeneity, sunk costs and market selection," International Journal of Industrial Organization, Elsevier, vol. 23(7-8), pages 505-534, September.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Ina Charlotte Jäkel, 2013. "Import-push or Export-pull? An Industry-level Analysis of the Impact of Trade on Firm Exit," Economics Working Papers 2013-20, School of Economics and Management, University of Aarhus.
  2. Igor Pospelov & Stanislav Radionov, 2013. "Multisector monopolistic competition model," HSE Working papers WP BRP 34/EC/2013, National Research University Higher School of Economics.
  3. Sanne Hiller & Philipp J.H. Schroeder & Allan Sorensen, 2013. "Export market exit and firm survival: theory and first evidence," Working Paper Series in Economics 262, University of Lüneburg, Institute of Economics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:aah:aarhec:2011-17. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.