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

Productivity and Firm Selection: Intra- vs International Trade

Contents:

Author Info

  • G. Corcos
  • M. Del Gatto

    ()

  • G. Mion
  • GIP. Ottaviano

Abstract

Recent theoretical models predict gains from international trade coming from intra-industry reallocations, due to a firm selection effect. In this paper we answer two related questions. First, what is the magnitude of this selection effect, and how does it compare to that of intra-national trade? Second, would the removal of ’behind-the-border’ trade frictions between integrated EU countries lead to large productivity gains? To answer these questions, we extend and calibrate the Melitz and Ottaviano (2005) model on productivity and trade data for European economies in 2000, and simulate counterfactual trade liberalization scenarios. We consider 11 EU countries and a total of 31 economies, including 21 French regions. Our first result is that, in the French case, international trade has a sizeable impact on aggregate productivity, but smaller than that of intra-national trade. Second, substantial productivity gains (around 20%) can be expected from ’behind-the-border’ integration. In both experiments, we predict the corresponding variations in average prices, markups, quantities and profits. We show that the model fits sales and exports data reasonably well, and we perform a number of robustness checks. We also suggest some explanations for the substantial cross-economy and cross-industry variations in our estimates of productivity gains, highlighting the importance of accessibility and competitiveness.

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: http://crenos.unica.it/crenos/node/255
Download Restriction: no

File URL: http://crenos.unica.it/crenos/sites/all/modules/pubdlcnt/pubdlcnt.php?file=http://crenos.unica.it/crenos/sites/default/files/wp/07-06.pdf&nid=255
Download Restriction: no

Bibliographic Info

Paper provided by Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia in its series Working Paper CRENoS with number 200706.

as in new window
Length:
Date of creation: 2007
Date of revision:
Handle: RePEc:cns:cnscwp:200706

Contact details of provider:
Postal: Via S. Giorgio 12, I-09124 Cagliari
Phone: +70/6756406
Fax: +70/6756402
Email:
Web page: http://www.crenos.unica.it/
More information through EDIRC

Related research

Keywords: european integration; intra-national trade; firm-level data; firm selection; gains from trade; total factor productivity;

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. Anne-Célia Disdier & Keith Head, 2004. "The Puzzling Persistence of the Distance Effect on Bilateral Trade," Development Working Papers, Centro Studi Luca d\'Agliano, University of Milano 186, Centro Studi Luca d\'Agliano, University of Milano.
  2. Chad Syverson, 2004. "Market Structure and Productivity: A Concrete Example," NBER Working Papers 10501, National Bureau of Economic Research, Inc.
  3. Thierry Mayer & Keith Head, 2002. "Illusory Border Effects: Distance Mismeasurement Inflates Estimates of Home Bias in Trade," Working Papers, CEPII research center 2002-01, CEPII research center.
  4. Marc J. Melitz & Gianmarco I.P. Ottaviano, 2005. "Market Size, Trade, and Productivity," NBER Working Papers 11393, National Bureau of Economic Research, Inc.
  5. Jonathan Eaton & Samuel Kortum, 2004. "An Anatomy of International Trade: Evidence from French Firms," 2004 Meeting Papers, Society for Economic Dynamics 802, Society for Economic Dynamics.
  6. Andrew B. Bernard & J. Bradford Jensen, 1997. "Exceptional Exporter Performance: Cause, Effect, or Both?," NBER Working Papers 6272, National Bureau of Economic Research, Inc.
  7. Joao Santos Silva & Silvana Tenreyro, 2005. "The log of gravity," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 3744, London School of Economics and Political Science, LSE Library.
  8. Francisco Alcalá & Antonio Ciccone, 2003. "Trade and Productivity," Working Papers 12, Barcelona Graduate School of Economics.
  9. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jenson & Samuel Kortum, 2000. "Plants and Productivity in International Trade," NBER Working Papers 7688, National Bureau of Economic Research, Inc.
  10. Keith Head & Thierry Mayer, 2004. "Market Potential and the Location of Japanese Investment in the European Union," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 959-972, November.
  11. G. Steven Olley & Ariel Pakes, 1992. "The Dynamics of Productivity in the Telecommunications Equipment Industry," NBER Working Papers 3977, National Bureau of Economic Research, Inc.
  12. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, American Economic Association, vol. 93(1), pages 170-192, March.
  13. Jacques-Bernard Sauner-Leroy, 2003. "The impact of the implementation of the Single Market Programme on productive efficiency and on mark-ups in the European Union manufacturing industry," European Economy - Economic Papers, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission 192, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  14. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2006. "Trading Partners and Trading Volumes," DEGIT Conference Papers, DEGIT, Dynamics, Economic Growth, and International Trade c011_022, DEGIT, Dynamics, Economic Growth, and International Trade.
  15. Sofronis Clerides & Saul Lach & James Tybout, 1996. "Is "Learning-by-Exporting" Important? Micro-Dynamic Evidence from Colombia, Mexico and Morocco," NBER Working Papers 5715, National Bureau of Economic Research, Inc.
  16. De Sousa, José & Mayer, Thierry & Zignago, Soledad, 2012. "Market Access in Global and Regional Trade," CEPREMAP Working Papers (Docweb), CEPREMAP 1201, CEPREMAP.
  17. Jeffrey R. Campbell & Hugo Hopenhayn, 2003. "Market size matters," Working Paper Series, Federal Reserve Bank of Chicago WP-03-12, Federal Reserve Bank of Chicago.
  18. Keith Head & Thierry Mayer, 2000. "Non-Europe: The magnitude and causes of market fragmentation in the EU," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 136(2), pages 284-314, June.
  19. Turrini, Alessandro Antonio & van Ypersele, Tanguy, 2006. "Legal Costs as Barriers to Trade," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5751, C.E.P.R. Discussion Papers.
  20. Andrew B. Bernard & J. Bradford Jensen & Peter K. Schott, 2003. "Falling trade costs, heterogeneous firms and industry dynamics," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 20027, London School of Economics and Political Science, LSE Library.
  21. Frankel, Jeffrey & Rose, Andrew K., 2001. "An Estimate of the Effect of Common Currencies on Trade and Income," Working Paper Series, Harvard University, John F. Kennedy School of Government rwp01-013, Harvard University, John F. Kennedy School of Government.
  22. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 70(2), pages 317-341, 04.
  23. DEL GATTO, Massimo & MION, Giordano & OTTAVIANO, Gianmarco I.P., 2006. "Trade integration, firm selection and the costs of non-Europe," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 2006061, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  24. Chen, Natalie, 2002. "Intra-national versus International Trade in the European Union: Why do National Borders Matter?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3407, C.E.P.R. Discussion Papers.
  25. Combes, Pierre-Philippe & Lafourcade, Miren & Mayer, Thierry, 2005. "The trade-creating effects of business and social networks: evidence from France," Journal of International Economics, Elsevier, Elsevier, vol. 66(1), pages 1-29, May.
  26. Aw, Bee Yan & Chung, Sukkyun & Roberts, Mark J, 2000. "Productivity and Turnover in the Export Market: Micro-level Evidence from the Republic of Korea and Taiwan (China)," World Bank Economic Review, World Bank Group, World Bank Group, vol. 14(1), pages 65-90, January.
  27. 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.
  28. repec:rus:hseeco:122439 is not listed on IDEAS
  29. Holger C. Wolf, 2000. "Intranational Home Bias In Trade," The Review of Economics and Statistics, MIT Press, vol. 82(4), pages 555-563, November.
  30. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, American Economic Association, vol. 85(3), pages 615-23, June.
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. G. Marletto, 2007. "Crossing The Alps: Three Transport Policy Options," Working Paper CRENoS 200712, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  2. Ufuk Akcigit, 2009. "Firm Size, Innovation Dynamics and Growth," 2009 Meeting Papers, Society for Economic Dynamics 1267, Society for Economic Dynamics.
  3. Imbriani, Cesare & Morone, Piergiuseppe & Testa, Giuseppina, 2008. "Exporting quality: is it the right strategy for the Italian manufacturing sector?," MPRA Paper 13327, University Library of Munich, Germany.
  4. Hübler, Michael & Keller, Andreas, 2010. "Energy savings via FDI? Empirical evidence from developing countries," Environment and Development Economics, Cambridge University Press, Cambridge University Press, vol. 15(01), pages 59-80, February.
  5. König, Michael & Lorenz, Jan & Zilibotti, Fabrizio, 2012. "Innovation vs imitation and the evolution of productivity distributions," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8843, C.E.P.R. Discussion Papers.
  6. Corocs Gregory & Massimo Del Gatto & Giordano Mion & Gianmarco I P. Ottaviano, 2009. "Productivity and firm selection: quantifying the "new" gains from trade," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 33249, London School of Economics and Political Science, LSE Library.
  7. Felbermayr, Gabriel J. & Jung, Benjamin, 2008. "Sorting it out: Technical barriers to trade and industry productivity," Tübinger Diskussionsbeiträge, University of Tübingen, School of Business and Economics 315, University of Tübingen, School of Business and Economics.
  8. Michele Imbruno, 2008. "EXPORTING, PRODUCTIVITY AND MARKET INTEGRATON: Italian manufacturing firms within the European context," Quaderni DSEMS, Dipartimento di Scienze Economiche, Matematiche e Statistiche, Universita' di Foggia 22-2008, Dipartimento di Scienze Economiche, Matematiche e Statistiche, Universita' di Foggia.
  9. Lejour, Arjan & Rojas Romasgosa, Hugo & Rodriguez, Victor & Montalvo, Carvos & Van der Zee, Frans, 2009. "Trade costs, Openness and Productivity: Market Access at Home and Abroad," MPRA Paper 21214, University Library of Munich, Germany.
  10. I. Sulis & M. Porcu, 2008. "Assessing the Effectiveness of a Stochastic Regression Imputation Method for Ordered Categorical Data," Working Paper CRENoS 200804, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  11. M. Pitzalis & I. Sulis & M. Porcu, 2008. "Differences of Cultural Capital among Students in Transition to University. Some First Survey Evidences," Working Paper CRENoS 200805, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.

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:cns:cnscwp:200706. 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: (Antonello Pau).

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.