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Export growth and factor market competition: theory and evidence

  • Emami Namini, Julian
  • Facchini, Giovanni
  • Lopez, Ricardo

Empirical evidence suggests that sectoral export growth decreases exporters' survival probability, whereas non--exporters are unaffected. Models with firm heterogeneity in total factor productivity predict the opposite. To solve this puzzle, we develop a two--factor framework where firms differ in factor shares. In this model, export growth increases competition for the factor used intensively by exporters, eliminating some of them, while non--exporters benefit. Our empirical analysis shows that the forces highlighted in the model drive the firm selection experienced by the Chilean manufacturing sector, suggesting that heterogeneity in factor shares is crucial to understand how firms react to trade liberalization.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8256.

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Date of creation: Feb 2011
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Handle: RePEc:cpr:ceprdp:8256
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  1. Alvarez, Roberto & Görg, Holger, 2005. "Multinationals and Plant Exit: Evidence from Chile," IZA Discussion Papers 1611, Institute for the Study of Labor (IZA).
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  12. Lopez, Ricardo A., 2006. "Imports of intermediate inputs and plant survival," Economics Letters, Elsevier, vol. 92(1), pages 58-62, July.
  13. Roberto Alvarez & Ricardo Lopez, 2008. "Skill Upgrading and the Real Exchange Rate," Caepr Working Papers 2008-020, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
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  17. repec:cdl:indrel:124333 is not listed on IDEAS
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