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Firms in International Trade

  • Andrew B. Bernard
  • J. Bradford Jensen
  • Stephen J. Redding
  • Peter K. Schott

Despite the fact that importing and exporting are extremely rare firm activities, economists generally devote little attention to the role of firms when discussing international trade. This paper summarizes key differences between trading and non-trading firms, demonstrates how these differences present a challenge to standard trade models and shows how recent "heterogeneous-firm" models of international trade address these challenges. We then make use of transaction-level U.S. trade data to introduce a number of new stylized facts about firms and trade. These facts reveal that the extensive margins of trade -- that is, the number of products firms trade as well as the number of countries with which they trade -- are central to understanding the well-known role of distance in dampening aggregate trade flows.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13054.

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Date of creation: Apr 2007
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Publication status: published as Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2007. "Firms in International Trade," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 105-130, Summer.
Handle: RePEc:nbr:nberwo:13054
Note: ITI
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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  1. Bernard, A., 1997. "Exceptional Exporter Performance: Cause, Effect, or Both?," Working papers 97-21, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Andrew B. Bernard & J. Bradford Jensen, 2006. "Firm Structure, Multinationals, and Manufacturing Plant Deaths," Working Paper Series WP06-7, Peterson Institute for International Economics.
  3. Volker Nocke & Stephen Yeaple, 2006. "Globalization and Endogenous Firm Scope," NBER Working Papers 12322, National Bureau of Economic Research, Inc.
  4. Andrew Bernard & J. Bradford Jensen & Peter Schott, 2003. "Survival of the best fit: exposure to low-wage countries and the (uneven) growth of US manufacturing plants," IFS Working Papers W03/12, Institute for Fiscal Studies.
  5. Peter K. Schott, 2004. "Across-product Versus Within-product Specialization in International Trade," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 646-677, May.
  6. Daniel Trefler, 2004. "The Long and Short of the Canada-U. S. Free Trade Agreement," American Economic Review, American Economic Association, vol. 94(4), pages 870-895, September.
  7. Andrew Bernard & Stephen Redding & Peter Schott, 2008. "Multi-Product Firms and Product Switching," Working Papers 08-24, Center for Economic Studies, U.S. Census Bureau.
  8. Sanghamitra Das & Mark J. Roberts & James R. Tybout, 2007. "Market Entry Costs, Producer Heterogeneity, and Export Dynamics," Econometrica, Econometric Society, vol. 75(3), pages 837-873, 05.
  9. Sofronis K. Clerides & Saul Lach & James R. Tybout, 1998. "Is Learning By Exporting Important? Micro-Dynamic Evidence From Colombia, Mexico, And Morocco," The Quarterly Journal of Economics, MIT Press, vol. 113(3), pages 903-947, August.
  10. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2011. "Multiproduct Firms and Trade Liberalization," The Quarterly Journal of Economics, Oxford University Press, vol. 126(3), pages 1271-1318.
  11. Mark J. Melitz, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," NBER Working Papers 8881, National Bureau of Economic Research, Inc.
  12. Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, vol. 85(5), pages 1029-46, December.
  13. Bernard, Andrew B. & Redding, Stephen J. & Schott, Peter K., 2004. "Comparative Advantage and Heterogenous Firms," CEPR Discussion Papers 4622, C.E.P.R. Discussion Papers.
  14. Caves, Douglas W & Christensen, Laurits R & Diewert, W Erwin, 1982. "The Economic Theory of Index Numbers and the Measurement of Input, Output, and Productivity," Econometrica, Econometric Society, vol. 50(6), pages 1393-1414, November.
  15. Johannes Van Biesebroeck, 2003. "Exporting Raises Productivity in Sub-Saharan African Manufacturing Plants," NBER Working Papers 10020, National Bureau of Economic Research, Inc.
  16. repec:rus:hseeco:122439 is not listed on IDEAS
  17. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2003. "Plants and Productivity in International Trade," American Economic Review, American Economic Association, vol. 93(4), pages 1268-1290, September.
  18. Elhanan Helpman, 1998. "The Structure of Foreign Trade," NBER Working Papers 6752, National Bureau of Economic Research, Inc.
  19. Jonathan Eaton & Samuel Kortum, 2004. "An Anatomy of International Trade: Evidence from French Firms," 2004 Meeting Papers 802, Society for Economic Dynamics.
  20. Marc J. Melitz & Gianmarco I.P. Ottaviano, 2005. "Market Size, Trade, and Productivity," NBER Working Papers 11393, National Bureau of Economic Research, Inc.
  21. 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.
  22. Carsten Eckel & J. Peter Neary, 2010. "Multi-Product Firms and Flexible Manufacturing in the Global Economy," Review of Economic Studies, Oxford University Press, vol. 77(1), pages 188-217.
  23. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2007. "Estimating Trade Flows: Trading Partners and Trading Volumes," NBER Working Papers 12927, National Bureau of Economic Research, Inc.
  24. Hillberry, Russell & Hummels, David, 2008. "Trade responses to geographic frictions: A decomposition using micro-data," European Economic Review, Elsevier, vol. 52(3), pages 527-550, April.
  25. Helpman, Elhanan, 2006. "Trade, FDI and the Organization of Firms," CEPR Discussion Papers 5589, C.E.P.R. Discussion Papers.
  26. Juan Carlos Hallak & Peter K. Schott, 2011. "Estimating Cross-Country Differences in Product Quality," The Quarterly Journal of Economics, Oxford University Press, vol. 126(1), pages 417-474.
  27. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September.
  28. David Hummels & Alexandre Skiba, 2004. "Shipping the Good Apples Out? An Empirical Confirmation of the Alchian-Allen Conjecture," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1384-1402, December.
  29. David Hummels & Peter J. Klenow, 2005. "The Variety and Quality of a Nation's Exports," American Economic Review, American Economic Association, vol. 95(3), pages 704-723, June.
  30. Roberts, Mark J & Tybout, James R, 1997. "The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs," American Economic Review, American Economic Association, vol. 87(4), pages 545-64, September.
  31. Nina Pavcnik, 2000. "Trade Liberalization, Exit, and Productivity Improvements: Evidence from Chilean Plants," NBER Working Papers 7852, National Bureau of Economic Research, Inc.
  32. Bernard, Andrew B. & Jensen, J. Bradford & Schott, Peter K., 2006. "Trade costs, firms and productivity," Journal of Monetary Economics, Elsevier, vol. 53(5), pages 917-937, July.
  33. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
  34. Hallak, Juan Carlos, 2006. "Product quality and the direction of trade," Journal of International Economics, Elsevier, vol. 68(1), pages 238-265, January.
  35. repec:rus:hseeco:121669 is not listed on IDEAS
  36. Choi, E. Kwan & Harrigan, James, 2003. "Handbook of International Trade," Staff General Research Papers 11375, Iowa State University, Department of Economics.
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