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Country Size, Trade, and Productivity: An Analysis of Heterogenous Firms and Differential Beachhead Costs

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Author Info

  • Akerman, Anders

    ()
    (Dept. of Economics, Stockholm University)

  • Forslid, Rikard

    ()
    (Dept. of Economics, Stockholm University)

Abstract

This paper modifies the heterogenous firms and trade model by Melitz (2003) by explicitly modelling the beachhead cost of a firm in a new market as a function of market size. This leads to several new predictions compared to the standard model. In particular, the productivity of non exporters and exporters depends on market size. Moreover, manufacturing export shares vary inversely with market size. However, export shares converge (upwards) as markets are integrated. The empirical part of the paper offers support for our model specification.

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Bibliographic Info

Paper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number 2007:14.

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Length: 29 pages
Date of creation: 30 Jul 2007
Date of revision:
Handle: RePEc:hhs:sunrpe:2007_0014

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Postal: Department of Economics, Stockholm, S-106 91 Stockholm, Sweden
Phone: +46 8 16 20 00
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Web page: http://www.ne.su.se/
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Keywords: Heterogenous Firms; Market Size; Beachhead Costs;

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  1. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
  2. Helpman, Elhanan, 1987. "Imperfect competition and international trade: Evidence from fourteen industrial countries," Journal of the Japanese and International Economies, Elsevier, vol. 1(1), pages 62-81, March.
  3. Gianmarco Ottaviano & Takatoshi Tabuchi & Jacques-Francois Tissse, 1999. "Agglomeration and Trade Revisited," CIRJE F-Series CIRJE-F-65, CIRJE, Faculty of Economics, University of Tokyo.
  4. J Bradford Jensen & Andrew B Bernard, 2001. "Why Some Firms Export," Working Papers 01-05, Center for Economic Studies, U.S. Census Bureau.
  5. Karen Helene Midelfart-Knarvik & Henry G. Overman, 2002. "Delocation and European integration: is structural spending justified?," Economic Policy, CEPR & CES & MSH, vol. 17(35), pages 321-359, October.
  6. Andrew B Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2000. "Plants and productivity in international trade," Working Papers 00-08, Center for Economic Studies, U.S. Census Bureau.
  7. Costas Arkolakis, 2008. "Market Penetration Costs and the New Consumers Margin in International Trade," NBER Working Papers 14214, National Bureau of Economic Research, Inc.
  8. Sofronis Clerides & Saul Lach & James Tybout, 1996. "Is "Learning-by-Exporting" Important? Micro-Dynamic Evidence from Colombia, Mexico and Morocco," NBER Working Papers 5715, National Bureau of Economic Research, Inc.
  9. Jonathan Eaton & Samuel Kortum & Francis Kramarz, 2004. "Dissecting trade: firms, industries, and export destinations," Staff Report 332, Federal Reserve Bank of Minneapolis.
  10. Chad Syverson, 2004. "Market Structure and Productivity: A Concrete Example," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1181-1222, December.
  11. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
  12. Thorsten Schank & Claus Schnabel & Joachim Wagner, 2006. "Do exporters really pay higher wages? First evidence from German linked employer-employee data," Working Paper Series in Economics 28, University of Lüneburg, Institute of Economics.
  13. Choi, E. Kwan & Harrigan, James, 2003. "Handbook of International Trade," Staff General Research Papers 11375, Iowa State University, Department of Economics.
  14. 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.
  15. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
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