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Are capital intensive firms the biggest exporters?

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  • Forslid, Rikard
  • Okubo, Toshihiro

Abstract

This paper starts out from the observation that the export shares of firms (export to sales ratio) vary greatly among firms, and tend to be systematically related to the firms' capital labour ratios. This observation cannot be explained by the standard heterogeneous firms and trade model by Melitz (2003), which predicts that all exporting firms have identical export shares. In our model, we relate the difference in export shares to firm level differences in transport costs. Two factors influence a firm's transport cost in our model. First, firm scale can affect transportation costs, making freight rates lower for large firms. Second, we allow for an association between the capital intensity of a firm and its transportation costs. In accordance with data, we assume this relationship to be sector specific. This implies that our model can generate the result that more productive and capital intensive firms have higher export shares due to scale economies in transportation, but the model can also generate the opposite pattern that more capital intensive firms have lower export shares due to a strong positive association between capital labour ratio and transportation costs. We use Japanese manufacturing firm level data to calibrate our model by matching firm level export shares to data sector by sector. Regressing the calibrated transportation costs on actual data then shows that the calibrated (calculated) numbers can explain about half of the variation in the data.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8345.

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Date of creation: Apr 2011
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Handle: RePEc:cpr:ceprdp:8345

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Related research

Keywords: calibration; capital labour ratio; export shares; heterogeneous firms;

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References

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  1. Matthieu Crozet & Federico Trionfetti, 2011. "Comparative Advantage and Within-Industry Firms Performance," Working Papers 2011-01, CEPII research center.
  2. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 691-751, September.
  3. David Hummels & Alexandre Skiba, 2002. "Shipping the Good Apples Out? An Empirical Confirmation of the Alchian-Allen Conjecture," NBER Working Papers 9023, National Bureau of Economic Research, Inc.
  4. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 94(1), pages 300-316, March.
  5. Limao, Nuno & Venables, Anthony J., 1999. "Infrastructure, geographical disadvantage, and transport costs," Policy Research Working Paper Series 2257, The World Bank.
  6. WAKASUGI Ryuhei & TODO Yasuyuki & SATO Hitoshi & NISHIOKA Shuichiro & MATSUURA Toshiyuki & ITO Banri & TANAKA Ayumu, 2008. "The Internationalization of Japanese Firms: New Findings Based on Firm-Level Data," Discussion papers 08036, Research Institute of Economy, Trade and Industry (RIETI).
  7. Fukunari Kimura & Kozo Kiyota, 2006. "Exports, FDI, and Productivity: Dynamic Evidence from Japanese Firms," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 142(4), pages 695-719, December.
  8. Ariel Burstein & Jonathan Vogel, 2010. "Globalization, Technology, and the Skill Premium: A Quantitative Analysis," NBER Working Papers 16459, National Bureau of Economic Research, Inc.
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Cited by:
  1. Christian Volpe Martincus & Juan S. Blyde, 2012. "Shaky Roads and Trembling Exports: Assessing the Trade Effects of Domestic Infrastructure Using a Natural Experiment," IDB Publications 82533, Inter-American Development Bank.
  2. Ichiro Tokutsu & Kazuo Ogawa & Mika Saito, 2012. "Japan out of the Lost Decade," IMF Working Papers 12/171, International Monetary Fund.

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