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Export Growth and Factor Market Competition: Theory and Evidence

Author

Listed:
  • Julian Emami Namini

    (Erasmus University of Rotterdam)

  • Giovanni Facchini

    () (Erasmus University of Rotterdam and Tinbergen Institute, University of Milan, LdA, CEPR and CES-Ifo)

  • Ricardo A. Lopez

    (Brandeis University)

Abstract

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.

Suggested Citation

  • Julian Emami Namini & Giovanni Facchini & Ricardo A. Lopez, 2011. "Export Growth and Factor Market Competition: Theory and Evidence," Development Working Papers 309, Centro Studi Luca d'Agliano, University of Milano, revised 09 May 2011.
    • Handle: RePEc:csl:devewp:309
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    File URL: https://www.dagliano.unimi.it/media/WP2011_309.pdf
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    References listed on IDEAS

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    1. Roberto Alvarez & Ricardo A. López, 2005. "Exporting and performance: evidence from Chilean plants," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 38(4), pages 1384-1400, November.
    2. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2003. "Plants and Productivity in International Trade," American Economic Review, American Economic Association, vol. 93(4), pages 1268-1290, September.
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    4. Marco Leonardi, 2007. "Firm heterogeneity in capital-labour ratios and wage inequality," Economic Journal, Royal Economic Society, vol. 117(518), pages 375-398, March.
    5. Alvarez, Roberto & Görg, Holger, 2009. "Multinationals and plant exit: Evidence from Chile," International Review of Economics & Finance, Elsevier, vol. 18(1), pages 45-51, January.
    6. Erzo G. J. Luttmer, 2007. "Selection, Growth, and the Size Distribution of Firms," The Quarterly Journal of Economics, Oxford University Press, vol. 122(3), pages 1103-1144.
    7. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-1297, November.
    8. Martina Lawless & Karl Whelan, 2014. "Where Do Firms Export, How Much and Why?," The World Economy, Wiley Blackwell, vol. 37(8), pages 1027-1050, August.
    9. Timothy Dunne & Mark J. Roberts & Larry Samuelson, 1989. "The Growth and Failure of U. S. Manufacturing Plants," The Quarterly Journal of Economics, Oxford University Press, vol. 104(4), pages 671-698.
    10. Kasahara, Hiroyuki & Rodrigue, Joel, 2008. "Does the use of imported intermediates increase productivity? Plant-level evidence," Journal of Development Economics, Elsevier, vol. 87(1), pages 106-118, August.
    11. Lopez, Ricardo A., 2006. "Imports of intermediate inputs and plant survival," Economics Letters, Elsevier, vol. 92(1), pages 58-62, July.
    12. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 317-341.
    13. Edward C. Norton & Hua Wang & Chunrong Ai, 2004. "Computing interaction effects and standard errors in logit and probit models," Stata Journal, StataCorp LP, vol. 4(2), pages 154-167, June.
    14. Kjell G. Salvanes & Ragnar Tveteras, 2004. "Plant Exit, Vintage Capital and the Business Cycle," Journal of Industrial Economics, Wiley Blackwell, vol. 52(2), pages 255-276, June.
    15. Pavcnik, Nina, 2003. "What explains skill upgrading in less developed countries?," Journal of Development Economics, Elsevier, vol. 71(2), pages 311-328, August.
    16. repec:cdl:indrel:124333 is not listed on IDEAS
    17. Roberto Álvarez & Ricardo A. López, 2009. "Skill Upgrading and the Real Exchange Rate," The World Economy, Wiley Blackwell, vol. 32(8), pages 1165-1179, August.
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    Citations

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    Cited by:

    1. Julian Emami Namini & Ricardo A. López, 2013. "Factor price overshooting with trade liberalization: theory and evidence," Scottish Journal of Political Economy, Scottish Economic Society, vol. 60(2), pages 139-181, May.
    2. Leila Baghdadi & Sonia Ben Kheder & Hassen Arouri, 2017. "In Search of A New Development Model For Tunisia: Assessing the Performance of the Offshore Regime," Working Papers 1118, Economic Research Forum, revised 07 Jun 2017.
    3. Emami Namini, Julian & Facchini, Giovanni & López, Ricardo A., 2013. "Export growth and firm survival," Economics Letters, Elsevier, vol. 120(3), pages 481-486.
    4. Toraganlı, Nazlı & Yazgan, M. Ege, 2016. "Exchange rates and firm survival: An examination with Turkish firm-level data," Economic Systems, Elsevier, vol. 40(3), pages 433-443.
    5. Joachim Wagner, 2013. "Exports, imports and firm survival: first evidence for manufacturing enterprises in Germany," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 149(1), pages 113-130, March.
    6. Ina Jäkel, 2014. "Import-push or export-pull? An industry-level analysis of the impact of trade on firm exit," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 41(4), pages 747-775, November.
    7. Joachim Wagner, 2012. "International trade and firm performance: a survey of empirical studies since 2006," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 148(2), pages 235-267, June.

    More about this item

    Keywords

    Firm Dynamics; Two-Factor Trade Model; Firm Heterogeneity in Factor Shares; Chile; Manufacturing Industry;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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