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Do falling iceberg costs explain recent U.S. export growth?

  • George Alessandria
  • Horag Choi

Superseded by Working Paper 12-20 ; The authors study the rise in U.S. manufacturing exports from 1987 to 2002 through the lens of a monopolistically competitive model with heterogeneous producers and sunk costs of exporting. Using the model, they infer that iceberg costs fell nearly 27 percent in this period. Given this change in iceberg costs, the authors use the model to calculate the predicted increase in trade. Contrary to the findings in Yi (2003), they find that the exports should have grown an additional 70 percent (78.7 vs. 46.4). The model overpredicts export growth partly because it misses the shift in manufacturing to relatively small establishments that did not invest in becoming exporters. Contrary to the theory, employment was largely reallocated from very large establishments, those with more than 2,500 employees, toward very small manufacturing establishments, those with fewer than 100 employees. The authors also find that very little of the contraction in U.S. manufacturing employment can be attributed to trade.

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Paper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 10-10.

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Date of creation: 2010
Date of revision:
Handle: RePEc:fip:fedpwp:10-10
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  1. Sanghamitra Das & Mark J. Roberts & James R. Tybout, 2001. "Market entry costs, producer heterogeneity and export dynamics," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 03-10, Indian Statistical Institute, New Delhi, India.
  2. Alessandria, George & Choi, Horag, 2014. "Establishment heterogeneity, exporter dynamics, and the effects of trade liberalization," Journal of International Economics, Elsevier, vol. 94(2), pages 207-223.
  3. Alan C. Stockman & Linda L. Tesar, 1990. "Tastes and Technology in a Two-Country Model of the Business Cycle: Explaining International Comovements," NBER Working Papers 3566, National Bureau of Economic Research, Inc.
  4. George Alessandria & Horag Choi, 2005. "Do sunk costs of exporting matter for net export dynamics?," Working Papers 05-20, Federal Reserve Bank of Philadelphia.
  5. Benjamin Bridgman, 2008. "Data files for "Energy Prices and the Expansion of World Trade"," Technical Appendices 06-199, Review of Economic Dynamics.
  6. Benjamin Bridgman, . "Energy Prices and the Expansion of World Trade," Departmental Working Papers 2003-14, Department of Economics, Louisiana State University.
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