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Heterogeneous Firms and International Trade: The role of productivity and financial fragility

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  • Tiziana Assenza

    () (Università Cattolica del Sacro Cuore
    Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore)

  • Domenico Delli Gatti

    () (Università Cattolica del Sacro Cuore
    Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore)

  • Jakob Grazzini

    () (Università Cattolica del Sacro Cuore
    Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore)

  • Giorgio Ricchiuti

Abstract

In his seminal paper, starting from the premise that productivity is heterogeneous across firms, Melitz (2003) nicely accounts for the stylized fact that the level of 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. In our framework, in fact, the decision to export depends on both productivity and net worth, and both are heterogeneous across firms. 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. However, even a really high net worth may not guarantee the presence in both domestic and foreign markets if the firm does not have a minimum level of productivity. Finally, we explore the effects of changes in transport costs, fixed costs for exporters and the financial constraints.

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  • Tiziana Assenza & Domenico Delli Gatti & Jakob Grazzini & Giorgio Ricchiuti, 2016. "Heterogeneous Firms and International Trade: The role of productivity and financial fragility," DISCE - Working Papers del Dipartimento di Economia e Finanza def042, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  • Handle: RePEc:ctc:serie1:def042
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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. Michele Tettamanzi, 2017. "E Many Pluribus Unum: A Behavioural Macro-Economic Agent Based Model," DISCE - Working Papers del Dipartimento di Economia e Finanza def062, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    3. 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).
    4. 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).
    5. 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.
    6. 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).
    7. 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).

    More about this item

    Keywords

    Productivity; Net Worth; International trade; Heterogeneous firms.;

    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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