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Firms in International Trade

Author

Listed:
  • Andrew B. Bernard
  • J. Bradford Jensen
  • Stephen Redding
  • Peter K. Schott

Abstract

Despite the fact that importing and exporting are extremely rare firm activities, economists generally devote little attention to the role of firms when discussing international trade. This paper summarizes key differences between trading and non-trading firms, demonstrates how these differences present a challenge to standard trade models and shows how recent "heterogeneous-firm" models of international trade address these challenges. We then make use of transaction-level U.S. trade data to introduce a number of new stylized facts about firms and trade. These facts reveal that the extensive margins of trade - that is, the number of products firms trade as well as the number of countries with which they trade - are central to understanding the well-known role of distance in dampening aggregate trade flows.

Suggested Citation

  • Andrew B. Bernard & J. Bradford Jensen & Stephen Redding & Peter K. Schott, 2007. "Firms in International Trade," CEP Discussion Papers dp0795, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepdps:dp0795
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    More about this item

    Keywords

    Economic Geography; International Trade;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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