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Do falling iceberg costs explain recent U.S. export growth?

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  • George Alessandria
  • Horag Choi

Abstract

We study empirically and theoretically the growth of U.S. manufacturing exports from 1987 to 2007. We identify the change in iceberg costs with plant-level data on the intensity of exporting by exporters. Given this change in iceberg costs, we find that a GE model with heterogeneous establishments and a sunk cost of starting to export is consistent with both aggregate U.S. export growth and the changes in the number and size of U.S. exporters. The model also captures the non-linear dynamics of U.S. export growth. A model without a sunk export cost generates substantially less trade growth and misses out on the timing of export growth. Contrary to the theory, employment was largely reallocated from very large establishments, those with more than 2,500 employees, toward very small manufacturing establishments, those with fewer than 100 employees. Allowing for faster productivity growth in manufacturing, changes in capital intensity, and some changes in the underlying shock process makes the theory consistent with the changes in the employment size distribution. We also find that the contribution of trade to the contraction in U.S. manufacturing employment is small.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 12-20.

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Date of creation: 2012
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Handle: RePEc:fip:fedpwp:12-20

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Keywords: Exports ; Trade;

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References

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  1. George Alessandria & Horag Choi, 2007. "Do Sunk Costs of Exporting Matter for Net Export Dynamics?," The Quarterly Journal of Economics, MIT Press, vol. 122(1), pages 289-336, 02.
  2. Sanghamitra Das & Mark J. Roberts & James R. Tybout, 2007. "Market Entry Costs, Producer Heterogeneity, and Export Dynamics," Econometrica, Econometric Society, vol. 75(3), pages 837-873, 05.
  3. George Alessandria & Horag Choi, 2007. "Establishment heterogeneity, exporter dynamics, and the effects of trade liberalization," Working Papers 07-17, Federal Reserve Bank of Philadelphia.
  4. Benjamin Bridgman, . "Energy Prices and the Expansion of World Trade," Departmental Working Papers 2003-14, Department of Economics, Louisiana State University.
  5. Stockman, Alan C & Tesar, Linda L, 1995. "Tastes and Technology in a Two-Country Model of the Business Cycle: Explaining International Comovements," American Economic Review, American Economic Association, vol. 85(1), pages 168-85, March.
  6. Benjamin Bridgman, 2008. "Data files for "Energy Prices and the Expansion of World Trade"," Technical Appendices 06-199, Review of Economic Dynamics.
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Citations

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Cited by:
  1. George Alessandria & Horag Choi, 2010. "Understanding exports from the plant up," Business Review, Federal Reserve Bank of Philadelphia, issue Q4, pages 1-11.
  2. Roc Armenter & Miklos Koren, 2009. "Economies of scale and the size of exporters," Working Papers 09-15, Federal Reserve Bank of Philadelphia.
  3. Benjamin Brishman, 2010. "The Rise of Vertical Specialization Trade," BEA Working Papers 0051, Bureau of Economic Analysis.
  4. George Alessandria & Sangeeta Pratap & Vivian Yue, 2013. "Export dynamics in large devaluations," Working Papers 13-33, Federal Reserve Bank of Philadelphia.
  5. Dalton, John, 2013. "A Theory of Just-in-Time and the Growth in Manufacturing Trade," MPRA Paper 48223, University Library of Munich, Germany.
  6. Nie, Jun & Taylor, Lisa, 2013. "Economic growth in foreign regions and U.S. export growth," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 31-63.

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