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Betting on Exports: Trade and Endogenous Heterogeneity

Author

Listed:
  • Alessandra Bonfiglioli
  • Rosario Crinò
  • Gino Gancia

Abstract

We study the determinants of firm†level heterogeneity in a model where innovation choices upon entry affect the variance of productivity draws. In equilibrium, productivity is Pareto distributed with a shape parameter that depends on industry†level characteristics. We show that export opportunities, by increasing the pay†offs in the tail, induce firms to invest in bigger projects with more dispersed outcomes. When more productive firms pay higher wages, trade amplifies wage dispersion by making firms more unequal. These results are consistent with how firm size, innovation and wage heterogeneity vary in a panel of US industries and states.

Suggested Citation

  • Alessandra Bonfiglioli & Rosario Crinò & Gino Gancia, 2018. "Betting on Exports: Trade and Endogenous Heterogeneity," Economic Journal, Royal Economic Society, vol. 128(609), pages 612-651, March.
    • Handle: RePEc:wly:econjl:v:128:y:2018:i:609:p:612-651
    DOI: 10.1111/ecoj.12408
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    Cited by:

    1. Bonfiglioli, Alessandra & De Pace, Federica, 2021. "Export, Female Comparative Advantage and the Gender Wage Gap," CEPR Discussion Papers 15801, C.E.P.R. Discussion Papers.
    2. repec:bge:wpaper:1047 is not listed on IDEAS
    3. L. Benfratello & A. Bottasso & C. Piccardo, 2022. "R&D and export performance: exploring heterogeneity along the export intensity distribution," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 49(2), pages 189-232, June.
    4. Masashige Hamano & Francesco Zanetti, 2017. "Endogenous Turnover and Macroeconomic Dynamics," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 26, pages 263-279, October.
    5. Bonfiglioli, Alessandra & Crinò, Rosario & Gancia, Gino, 2025. "Firms and economic performance: A view from trade," European Economic Review, Elsevier, vol. 172(C).
    6. Bonfiglioli, Alessandra, 2020. "Comment on “Trade integration in Colombia: A dynamic general equilibrium study with new exporter dynamics”," Journal of Economic Dynamics and Control, Elsevier, vol. 115(C).
    7. Alessandra Bonfiglioli & Rosario Crinò & Gino Gancia, 2019. "Trade, Finance, and Endogenous Firm Heterogeneity," Journal of the European Economic Association, European Economic Association, vol. 17(1), pages 79-130.
    8. Chaney, Thomas, 2016. "Liquidity constrained exporters," Journal of Economic Dynamics and Control, Elsevier, vol. 72(C), pages 141-154.
    9. Berlingieri, Giuseppe & Blanchenay, Patrick & Criscuolo, Chiara, 2024. "The great divergence(s)," Research Policy, Elsevier, vol. 53(3).
    10. Bonfiglioli, Alessandra, 2016. "Comments on “Liquidity constrained exporters” by T. Chaney," Journal of Economic Dynamics and Control, Elsevier, vol. 72(C), pages 155-158.
    11. Bonfiglioli, Alessandra & Crinò, Rosario & Gancia, Gino, 2021. "Concentration in international markets: Evidence from US imports," Journal of Monetary Economics, Elsevier, vol. 121(C), pages 19-39.
    12. Arnoletto,Matias & Franco Bedoya,Sebastian & Reyes,Jose Daniel, 2020. "Exporters Dynamics and the Role of Imports in Argentina," Policy Research Working Paper Series 9218, The World Bank.
    13. Crinò, Rosario & Bonfiglioli, Alessandra & Gancia, Gino, 2021. "International Trade with Heterogeneous Firms: Theory and Evidence," CEPR Discussion Papers 16249, C.E.P.R. Discussion Papers.
    14. Morten Olsen & Joshua Gottlieb & David Hemous & Jeffrey Clemens, 2017. "The Spill-over Effects of Top Income Inequality," 2017 Meeting Papers 332, Society for Economic Dynamics.
    15. Crinò, Rosario & Ogliari, Laura, 2017. "Financial imperfections, product quality, and international trade," Journal of International Economics, Elsevier, vol. 104(C), pages 63-84.

    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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