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Endogenous Markups, Firm Productivity and International Trade: : Testing SomeMicro-Level Implications of theMelitz-Ottaviano Model

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Author Info
Bellone, Flora (GREDEG-CNRS)
Musso, Patrick (GREDEG-CNRS)
Nesta, Lionel (GREDEG-CNRS)
Warzynski, Frederic () (Department of Economics, Aarhus School of Business)

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Abstract

In this paper, we test key micro-level theoretical predictions ofMelitz and Ottaviano (MO) (2008), a model of international trade with heterogenous firms and endogenous mark-ups. At the firm-level, the MO model predicts that: 1) firm markups are negatively related to domestic market size; 2) markups are positively related to firm productivity; 3) markups are negatively related to import penetration; 4) markups are positively related to firm export intensity and markups are higher on the export market than on the domestic ones in the presence of trade barriers and/or if competitors on the export market are less efficient than competitors on the domestic market. We estimate micro-level price cost margins (PCMs) using firm-level data extending the techniques developed by Hall (1986, 1988) and extended by Domowitz et al. (1988) and Roeger (1995) for the French manufacturing industry from 1986 to 2004. We find evidence in favor of these theoretical predictions.

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File URL: http://research.asb.dk/fbspretrieve/3858/wp_08-20
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Publisher Info
Paper provided by University of Aarhus, Aarhus School of Business, Department of Economics in its series Working Papers with number 08-20.

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Length: 48 pages
Date of creation: 01 Sep 2008
Date of revision:
Handle: RePEc:hhs:aareco:2008_020

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Postal: The Aarhus School of Business, Prismet, Silkeborgvej 2, DK 8000 Aarhus C, Denmark
Phone: +45 89 486396
Fax: +45 8615 5175
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Related research
Keywords: Endogenous markups; Export behavior; Productivity; Firm-level;

Find related papers by JEL classification:
D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies

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