Firm Heterogeneity, Export Participation, and Trade Reform
This paper evaluates the welfare gains to trade reform in a model of endogenous export participation. Specifically, assuming that firms face an up-front, sunk cost of entering foreign markets and a smaller period-by-period continuation cost, we derive the discrete entry and exit decisions yielding exporter dynamics in an otherwise standard equilibrium open economy model. Lowering tariffs increases export participation by increasing the rate of entry and lowering the rate of exit from foreign markets. In contrast with previous work that does not include sunk costs of exporting or idiosyncratic firm productivity shocks, we find smaller welfare gains. With sunk costs the selection gain in productivity from increased entry of relatively productive firms is offset in part by the prolonged participation of the least productive firms. Consideration of transition dynamics also substantially lowers the welfare gains to trade reform
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||03 Dec 2006|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.EconomicDynamics.org/society.htm
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:red:sed006:795. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann)
If references are entirely missing, you can add them using this form.