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Country Size, Productivity and Trade Share Convergence: An Analysis of Heterogenous Firms and Country Size Dependent Beachhead Costs

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Author Info

  • Akerman, Anders
  • Forslid, Rikard

Abstract

This paper modifies the heterogenous firms and trade model by Melitz (2003) by explicitly modelling the entry cost of a firm in a new market as a function of market size. This leads to several new predictions compared to the standard model: The productivity of non exporters and exporters depends on market size. Moreover, manufacturing export shares vary inversely with country size. However, export shares converge (upwards) as markets are integrated. The empirical part of the paper offers support for our model specification.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6545.

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Date of creation: Oct 2007
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Handle: RePEc:cpr:ceprdp:6545

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Keywords: beachhead costs; heterogenous firms; market size;

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References

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  1. Thorsten Schank & Claus Schnabel & Joachim Wagner, 2006. "Do exporters really pay higher wages? First evidence from German linked employer-employee data," Working Paper Series in Economics 28, University of Lüneburg, Institute of Economics.
  2. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
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  14. 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.
  15. Helpman, Elhanan, 1987. "Imperfect competition and international trade: Evidence from fourteen industrial countries," Journal of the Japanese and International Economies, Elsevier, vol. 1(1), pages 62-81, March.
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  17. Karen Helene Midelfart-Knarvik & Henry G. Overman, 2002. "Delocation and European integration: is structural spending justified?," Economic Policy, CEPR & CES & MSH, vol. 17(35), pages 321-359, October.
  18. Sofronis K. Clerides & Saul Lach & James R. Tybout, 1998. "Is Learning By Exporting Important? Micro-Dynamic Evidence From Colombia, Mexico, And Morocco," The Quarterly Journal of Economics, MIT Press, vol. 113(3), pages 903-947, August.
  19. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
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Cited by:
  1. Fer, Shon & Forslid, Rikard, 2014. "Sizing Up the Impact of Embassies on Exports," Working Paper Series 1012, Research Institute of Industrial Economics.

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