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Export Growth and Factor Market Competition: Theory and Evidence

  • 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)

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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File URL: http://www.dagliano.unimi.it/media/WP2011_309.pdf
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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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  1. 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.
  2. 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.
  3. Dunne, T. & Roberts, M.J. & Samuelson, L., 1988. "The Growth And Failure Of U.S. Manufacturing Plants," Papers 1-87-5, Pennsylvania State - Department of Economics.
  4. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jenson & Samuel Kortum, 2000. "Plants and Productivity in International Trade," NBER Working Papers 7688, National Bureau of Economic Research, Inc.
  5. Markusen, James R. & Venables, Anthony J., 2000. "The theory of endowment, intra-industry and multi-national trade," Journal of International Economics, Elsevier, vol. 52(2), pages 209-234, December.
  6. Roberto Álvarez & Ricardo A. López, 2009. "Skill Upgrading and the Real Exchange Rate," Working Papers Central Bank of Chile 519, Central Bank of Chile.
  7. Martina Lawless & Karl Whelan, 2008. "Where do firms export, how much, and why?," Open Access publications 10197/2063, School of Economics, University College Dublin.
  8. 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.
  9. Pavcnik, Nina, 2003. "What explains skill upgrading in less developed countries?," Journal of Development Economics, Elsevier, vol. 71(2), pages 311-328, August.
  10. 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.
  11. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-97, November.
  12. Joel Rodrigue & Hiroyuki Kasahara, 2004. "Does the Use of Imported Intermediates Increase Productivity? Plant-Level Evidence," Econometric Society 2004 North American Summer Meetings 511, Econometric Society.
  13. Lopez, Ricardo A., 2006. "Imports of intermediate inputs and plant survival," Economics Letters, Elsevier, vol. 92(1), pages 58-62, July.
  14. repec:cdl:indrel:124333 is not listed on IDEAS
  15. 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.
  16. 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.
  17. 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.
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