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Learning How to Export

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  • Paul S. Segerstrom
  • Ignat Stepanok

Abstract

In this paper, we present a standard quality ladders endogenous growth model with one significant new assumption, that it takes time for firms to learn how to export. We show that this model without Melitz-type assumptions can account for all the evidence that the Melitz (2003) model was designed to explain plus much evidence that the Melitz model can not account for. In particular, consistent with the empirical evidence we find that trade liberalization leads to a higher exit rate of firms, that exporters charge higher prices for their products as well as higher markups, and that many large firms do not export. We also find that trade iberalization promotes economic growth and that it has the opposite effect of retarding economic growth in a closely comparable growth model with Melitz-type assumptions

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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1801.

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Length: 52 pages
Date of creation: Oct 2012
Date of revision:
Handle: RePEc:kie:kieliw:1801

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Keywords: Trade liberalization; heterogeneous firms; quality ladders; endogenous growth;

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References

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  1. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jenson & Samuel Kortum, 2000. "Plants and Productivity in International Trade," NBER Working Papers 7688, National Bureau of Economic Research, Inc.
  2. Paul S. Segerstrom & Yoichi Sugita, 2013. "The Impact of Trade Liberalization on Industrial Productivity," CESifo Working Paper Series 4365, CESifo Group Munich.
  3. Bernard, A., 1997. "Exceptional Exporter Performance: Cause, Effect, or Both?," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 97-21, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Kugler, Maurice & Verhoogen, Eric, 2009. "The Quality-Complementarity Hypothesis: Theory and Evidence from Colombia," IZA Discussion Papers 3932, Institute for the Study of Labor (IZA).
  5. Andrew.B Bernard & J. Bradford Jensen & Stephen Redding & Peter K. Schott, 2007. "Firms in international trade," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 3682, London School of Economics and Political Science, LSE Library.
  6. Klette, Tor Jakob & Kortum, Samuel, 2002. "Innovating Firms and Aggregate Innovation," Memorandum, Oslo University, Department of Economics 02/2002, Oslo University, Department of Economics.
  7. 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.
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  22. Aw, Bee Yan & Chung, Sukkyun & Roberts, Mark J, 2000. "Productivity and Turnover in the Export Market: Micro-level Evidence from the Republic of Korea and Taiwan (China)," World Bank Economic Review, World Bank Group, World Bank Group, vol. 14(1), pages 65-90, January.
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Cited by:
  1. Wolf-Heimo Grieben & Fuat Sener, 2012. "North-South Trade, Unemployment and Growth: What’s the Role of Labor Unions?," Working Paper Series of the Department of Economics, University of Konstanz, Department of Economics, University of Konstanz 2012-06, Department of Economics, University of Konstanz.

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