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Capacity Constrained Exporters: Micro Evidence and Macro Implications

Author

Listed:
  • JaeBin Ahn

    () (Research Department, International Monetary Fund)

  • Alexander McQuoid

    () (Department of Economics, Florida International University)

Abstract

This study challenges a central assumption of standard trade models: constant marginal cost technology. We present evidence consistent with the view that increasing marginal cost is present in the data, and further identify financial and physical capacity constraints as the main sources of increasing marginal cost. To understand and quantify the importance of increasing marginal cost faced by financially and physically constrained exporters, we develop a novel structural estimation framework that incorporates these micro frictions. Our structural estimates suggest that the presence of such capacity constrained firms can (1) reduce aggregate output responses to external demand shocks by 30% and (2) result in welfare loss by around 23%.

Suggested Citation

  • JaeBin Ahn & Alexander McQuoid, 2013. "Capacity Constrained Exporters: Micro Evidence and Macro Implications," Working Papers 1301, Florida International University, Department of Economics.
  • Handle: RePEc:fiu:wpaper:1301
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    References listed on IDEAS

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    Cited by:

    1. Berman, Nicolas & Berthou, Antoine & Héricourt, Jérôme, 2015. "Export dynamics and sales at home," Journal of International Economics, Elsevier, pages 298-310.
    2. Chung, Sunghoon & Lee, Joonhyung & Osang, Thomas, 2016. "Did China tire safeguard save U.S. workers?," European Economic Review, Elsevier, vol. 85(C), pages 22-38.
    3. Belke, Ansgar & Oeking, Anne & Setzer, Ralph, 2014. "Exports and Capacity Constraints: A smooth transition regression model for six euro-area countries," CEPS Papers 9228, Centre for European Policy Studies.
    4. JaeBin Ahn & Chang-Gui Park, 2014. "Imported-Inputs Channel of Exchange Rate Pass-Through: Evidence from Korean Firm-Level Pricing Survey," Working Papers 2014-11, Economic Research Institute, Bank of Korea.
    5. Ansgar Belke & Anne Oeking & Ralph Setzer, 2013. "Exports and Capacity Constraints – A Smooth Transition Regression Model for Six Euro Area Countries," ROME Working Papers 201313, ROME Network.
    6. Ansgar Belke & Anne Oeking & Ralph Setzer, 2015. "Exports and Capacity Constraints: Evidence for Several Euro Area Countries," CESifo Working Paper Series 5455, CESifo Group Munich.
    7. Paulo Esteves & António Rua, 2015. "Is there a role for domestic demand pressure on export performance?," Empirical Economics, Springer, vol. 49(4), pages 1173-1189, December.
    8. Alexander F. McQuoid & JaeBin Ahn, 2015. "Capacity Constrained Exporters: Identifying Increasing Marginal Cost," Departmental Working Papers 49, United States Naval Academy Department of Economics.
    9. Muñoz Sepúlveda, Jesús A., 2014. "Residual exports and domestic demand: an empirical analysis," MPRA Paper 58328, University Library of Munich, Germany.
    10. Bugamelli, Matteo & Gaiotti, Eugenio & Viviano, Eliana, 2015. "Domestic and foreign sales: Complements or substitutes?," Economics Letters, Elsevier, vol. 135(C), pages 46-51.
    11. Muñoz Sepúlveda, Jesús A., 2014. "Residual exports and domestic demand: an empirical analysis," MPRA Paper 54799, University Library of Munich, Germany.
    12. Crespo, Aranzazu; Muñoz-Sepulveda, Jesus A., 2015. "The Role of Physical and Financial Constraints in Export Dynamics," Economics Working Papers MWP2015/17, European University Institute.
    13. Belke, Ansgar & Oeking, Anne & Setzer, Ralph, 2015. "Domestic demand, capacity constraints and exporting dynamics: Empirical evidence for vulnerable euro area countries," Economic Modelling, Elsevier, vol. 48(C), pages 315-325.
    14. Muñoz-Sepúlveda, Jesús A., 2017. "Restricciones de capacidad, exportación e I+D: Un análisis empírico con datos de empresas manufactureras españolas/Capacity Constraints, Exports and R&D: An Empirical Analysis with Data of Spanish Man," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 35, pages 133-152, Enero.
    15. Ansgar Belke & Anne Oeking & Ralph Setzer, 2014. "Domestic demand pressure and export dynamics – An empirical threshold model analysis for six euro area countries," EcoMod2014 6780, EcoMod.
    16. Arijit Mukherjee, 2016. "Firm-Productivity and Export under Non-Constant Marginal Costs," CESifo Working Paper Series 5770, CESifo Group Munich.
    17. Alexander McQuoid & Loris Rubini, 2014. "Trade Costs and Markups," Documentos de Trabajo 454, Instituto de Economia. Pontificia Universidad Católica de Chile..
    18. Alexander McQuoid & Loris Rubini, 2014. "The Opportunity Cost of Exporting," 2014 Meeting Papers 412, Society for Economic Dynamics.
    19. Soderbery, Anson, 2014. "Market size, structure, and access: Trade with capacity constraints," European Economic Review, Elsevier, vol. 70(C), pages 276-298.
    20. SUGITA, Yoichi, 2017. "A Matching Theory of Global Supply Chains," Discussion paper series HIAS-E-62, Hitotsubashi Institute for Advanced Study, Hitotsubashi University.
    21. repec:ebl:ecbull:eb-16-00152 is not listed on IDEAS

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