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Exports, borders, distance, and plant size

  • Holmes, Thomas J.
  • Stevens, John J.

The fact that large manufacturing plants export relatively more than small plants has been at the foundation of much work in the international trade literature. We examine this fact using Census microdata on plant shipments from the Commodity Flow Survey. We show that the fact is not entirely an international trade phenomenon; part of it can be accounted for by the effect of distance, distinct from any border effect. Export destinations tend to be farther than domestic destinations, and large plants tend to ship farther distances even to domestic locations compared with small plants. We develop an extension of the Melitz (2003) model and use it to set up an analysis with model interpretations of ratios between large plant and small plant shipments that can be calculated with the data. We obtain a decomposition of the overall ratio into a term that varies with distance, holding fixed the border, and a term that varies with the border, holding fixed the distance. The distance term accounts for more than half of the overall difference.

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Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 88 (2012)
Issue (Month): 1 ()
Pages: 91-103

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Handle: RePEc:eee:inecon:v:88:y:2012:i:1:p:91-103
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505552

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  9. Thomas J. Holmes & John J. Stevens, 2002. "Geographic Concentration and Establishment Scale," The Review of Economics and Statistics, MIT Press, vol. 84(4), pages 682-690, November.
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  11. Thomas J. Holmes & John J. Stevens, 2010. "An Alternative Theory of the Plant Size Distribution with an Application to Trade," NBER Working Papers 15957, National Bureau of Economic Research, Inc.
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  13. James E. Anderson & Eric van Wincoop, 2001. "Gravity with Gravitas: A Solution to the Border Puzzle," NBER Working Papers 8079, National Bureau of Economic Research, Inc.
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