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Cross-Industry Heterogeneity in Export Participation: The Role of Scale Economies in R&D

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This paper shows that the R&D intensity of an industry plays an important role in determining international trade patterns via its e¤ect on scale economies. I first develop a model of trade with heterogeneous firms where firms compete with each other by spending on fixed product development costs such as R&D. The model predicts that a larger share of firms are exporters in industries where R&D is a large component of total costs. The model also predicts that R&D-intense industries are less sensitive to trade costs. I find empirical support for these predictions using firm-level data for Swedish manufacturing industries. The results also highlight the importance of controlling for firm size when measuring the firm extensive margin of exports.

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  • Ferguson, Shon, 2012. "Cross-Industry Heterogeneity in Export Participation: The Role of Scale Economies in R&D," Working Paper Series 930, Research Institute of Industrial Economics.
    • Handle: RePEc:hhs:iuiwop:0930
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    12. Bas, Maria, 2008. "Trade, technology adoption and wage inequalities: theory and evidence," LSE Research Online Documents on Economics 28513, London School of Economics and Political Science, LSE Library.
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    Cited by:

    1. Flach, Lisandra & Unger, Florian, 2022. "Quality and gravity in international trade," Journal of International Economics, Elsevier, vol. 137(C).

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    More about this item

    Keywords

    International Trade; Trade Costs; Endogenous Sunk Costs;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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