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Heterogeneous Firms and International Trade: The Role of Productivity and Financial Fragility

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Listed author(s):
  • Tiziana Assenza
  • Domenico Delli Gatti
  • Jakob Grazzini
  • Giorgio Ricchiuti

Abstract

Starting from the premise that productivity is heterogeneous across firms, Melitz (2003) explains why individual productivity is key in determining the capability of a firm to export. In this paper we build a model along Melitz’s lines to show that also financial capacity, captured by the level of individual net worth, affects the behaviour of firms on international markets. We show that firms with low productivity may still be able to penetrate foreign markets provided they have enough net worth to incur the cost of exporting. In this setting, we explore the effects of changes in transport costs, fixed costs for exporters and of financial constraints.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 5959.

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Date of creation: 2016
Handle: RePEc:ces:ceswps:_5959
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Keywords: productivity; net worth; international trade; heterogeneous firms;

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Find related papers by JEL classification:
  • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
  • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
  • F14 - International Economics - - Trade - - - Empirical Studies of Trade
  • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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Cited by:

  1. Simone Moriconi, 2016. "Taxation, Industry Integration and Production Efficiency," CESifo Working Paper Series 6001, CESifo Group Munich.
  2. Luca Fiorito & Cosma Orsi, 2016. "Survival Value And A Robust, Practical, Joyless Individualism: Thomas Nixon Carver, Social Justice, And Eugenics," DISCE - Working Papers del Dipartimento di Economia e Finanza def044, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  3. Elenka Brenna & Lara Gitto, 2016. "Financing elderly care in Italy and Europe. Is there a common vision?," DISCE - Working Papers del Dipartimento di Economia e Finanza def047, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  4. Tiziana Assenza & Domenico Delli Gatti & Jakob Grazzini & Giorgio Ricchiuti, 2016. "Heterogeneous Firms and International Trade: The Role of Productivity and Financial Fragility," CESifo Working Paper Series 5959, CESifo Group Munich.
  5. Elena Cottini & Paolo Ghinetti, 2017. "Is it the way you live or the job you have? Health effects of lifestyles and working conditions," DISCE - Working Papers del Dipartimento di Economia e Finanza def056, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  6. Grazia Cecere & Nicoletta Corrocher & Maria Luisa Mancusi, 2016. "Financial constraints and public funding for eco-innovation: Empirical evidence on European SMEs," DISCE - Working Papers del Dipartimento di Economia e Finanza def046, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).

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