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Export Growth and Factor Market Competition: Theory and Evidence

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  • Julian Emami Namini

    (Erasmus University of Rotterdam)

  • Giovanni Facchini

    ()
    (Erasmus University of Rotterdam and Tinbergen Institute, University of Milan, LdA, CEPR and CES-Ifo)

  • Ricardo A. Lopez

    (Brandeis University)

Abstract

Empirical evidence suggests that sectoral export growth decreases exporters\' survival probability, whereas non{exporters are unaffected. Models with firm heterogeneity in total factor productivity predict the opposite. To solve this puzzle, we develop a two-factor framework where firms differ in factor shares. In this model, export growth increases competition for the factor used intensively by exporters, eliminating some of them, while non-exporters benefit. Our empirical analysis shows that the forces highlighted in the model drive the firm selection experienced by the Chilean manufacturing sector, suggesting that heterogeneity in factor shares is crucial to understand how firms react to trade liberalization.

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Bibliographic Info

Paper provided by Centro Studi Luca d\'Agliano, University of Milano in its series Development Working Papers with number 309.

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Length: 37
Date of creation: 09 May 2011
Date of revision: 09 May 2011
Handle: RePEc:csl:devewp:309

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Keywords: Firm Dynamics; Two-Factor Trade Model; Firm Heterogeneity in Factor Shares; Chile; Manufacturing Industry;

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References

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  1. Alvarez, Roberto & Görg, Holger, 2005. "Multinationals and Plant Exit: Evidence from Chile," IZA Discussion Papers 1611, Institute for the Study of Labor (IZA).
  2. Nina Pavcnik, 2000. "What Explains Skill Upgrading in Less Developed Countries?," NBER Working Papers 7846, National Bureau of Economic Research, Inc.
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  6. Lawless, Martina & Whelan, Karl, 2008. "Where do Firms Export, How Much and Why?," Research Technical Papers 6/RT/08, Central Bank of Ireland.
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  10. Roberto Alvarez & Ricardo López, 2005. "Exporting and performance: evidence from Chilean plants," Canadian Journal of Economics, Canadian Economics Association, vol. 38(4), pages 1384-1400, November.
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  13. Dunne, Timothy & Roberts, Mark J & Samuelson, Larry, 1989. "The Growth and Failure of U.S. Manufacturing Plants," The Quarterly Journal of Economics, MIT Press, vol. 104(4), pages 671-98, November.
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  16. Leonardi, Marco, 2003. "Firms' Heterogeneity in Capital/Labor Ratios and Wage Inequality," Royal Economic Society Annual Conference 2003 136, Royal Economic Society.
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Citations

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Cited by:
  1. Julian Emami Namini & Ricardo Lopez, 2012. "Factor Price Overshooting with Trade Liberalization: Theory and Evidence," Working Papers 52, Brandeis University, Department of Economics and International Businesss School.
  2. Joachim Wagner, 2013. "Exports, imports and firm survival: first evidence for manufacturing enterprises in Germany," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 149(1), pages 113-130, March.
  3. Joachim Wagner, 2012. "International trade and firm performance: a survey of empirical studies since 2006," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 148(2), pages 235-267, June.

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