Are Capital Intensive Firms the Biggest Exporters?
AbstractThis 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 e.g. the standard Melitz model, since it 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. Second, we allow for an association between the capital intensity of a firm and its transportation costs. As in our data, we assume this relationship to be sector specific. 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 InfoPaper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 11014.
Length: 29 pages
Date of creation: Mar 2011
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Other versions of this item:
- Forslid, Rikard & Okubo, Toshihiro, 2011. "Are capital intensive firms the biggest exporters?," CEPR Discussion Papers 8345, C.E.P.R. Discussion Papers.
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F15 - International Economics - - Trade - - - Economic Integration
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-03-26 (All new papers)
- NEP-BEC-2011-03-26 (Business Economics)
- NEP-INT-2011-03-26 (International Trade)
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