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Export Growth and Factor Market Competition: Theory and Evidence

Author Info

  • 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.

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Paper provided by Centro Studi Luca d\'Agliano, University of Milano in its series Development Working Papers with number 309.

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Length: 37
Date of creation: 09 May 2011
Date of revision: 09 May 2011
Handle: RePEc:csl:devewp:309
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Keywords: Firm Dynamics; Two-Factor Trade Model; Firm Heterogeneity in Factor Shares; Chile; Manufacturing Industry;

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Find related papers by 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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  1. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Wiley Blackwell, vol. 70(2), pages 317-341, 04.
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  5. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2000. "Plants and Productivity in International Trade," Boston University - Institute for Economic Development 105, Boston University, Institute for Economic Development.
  6. Pavcnik, Nina, 2003. "What explains skill upgrading in less developed countries?," Journal of Development Economics, Elsevier, vol. 71(2), pages 311-328, August.
  7. Lopez, Ricardo A., 2006. "Imports of intermediate inputs and plant survival," Economics Letters, Elsevier, vol. 92(1), pages 58-62, July.
  8. Lawless, Martina & Whelan, Karl, 2008. "Where do Firms Export, How Much and Why?," Research Technical Papers 6/RT/08, Central Bank of Ireland.
  9. Roberto Alvarez & Ricardo López, 2005. "Exporting and performance: evidence from Chilean plants," Canadian Journal of Economics, Canadian Economics Association, vol. 38(4), pages 1384-1400, November.
  10. 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, 06.
  11. James R. Markusen & Anthony J. Venables, 1996. "The Theory of Endowment, Intra-Industry, and Multinational Trade," NBER Working Papers 5529, National Bureau of Economic Research, Inc.
  12. 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.
  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. Roberto �lvarez & Ricardo A. López, 2009. "Skill Upgrading and the Real Exchange Rate," The World Economy, Wiley Blackwell, vol. 32(8), pages 1165-1179, 08.
  15. Leonardi, Marco, 2005. "Firm Heterogeneity in Capital labor Ratios and Wage Inequality," Institute for Research on Labor and Employment, Working Paper Series qt1g9514wh, Institute of Industrial Relations, UC Berkeley.
  16. repec:cdl:indrel:124333 is not listed on IDEAS
  17. Dunne, Timothy & Roberts, Mark J & Samuelson, Larry, 1989. "The Growth and Failure of U.S. Manufacturing Plants," The Quarterly Journal of Economics, MIT Press, vol. 104(4), pages 671-98, November.
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Cited by:

  1. Joachim Wagner, 2013. "Exports, imports and firm survival: first evidence for manufacturing enterprises in Germany," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 149(1), pages 113-130, March.
  2. Joachim Wagner, 2012. "International trade and firm performance: a survey of empirical studies since 2006," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 148(2), pages 235-267, June.
  3. Julian Emami Namini & Ricardo Lopez, 2012. "Factor Price Overshooting with Trade Liberalization: Theory and Evidence," Working Papers 52, Brandeis University, Department of Economics and International Businesss School.

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