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Entry Costs & Increasing Trade

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  • William F. Lincoln
  • Andrew H. McCallum

Abstract

Using confidential microdata from the US Census, we find that the fraction of manufacturing plants that export rose from 21% in 1987 to 39% in 2006. It has been suggested that similar trends in other countries may have been caused by declining costs of entering foreign markets. Our study tests this hypothesis for the first time. Both reduced form and structural estimation approaches find little evidence that the entry costs declined significantly in the US over this period. We instead argue that changes in other factors that determine export status are sufficient to explain these trends.

Suggested Citation

  • William F. Lincoln & Andrew H. McCallum, 2011. "Entry Costs & Increasing Trade," William Davidson Institute Working Papers Series wp1024, William Davidson Institute at the University of Michigan.
    • Handle: RePEc:wdi:papers:2011-1024
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    File URL: http://deepblue.lib.umich.edu/bitstream/2027.42/133040/1/wp1024.pdf
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    References listed on IDEAS

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    Cited by:

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    2. Ryan Monarch, 2014. ""It's Not You, It's Me": Breakup In U.S.-China Trade Relationships," Working Papers 14-08, Center for Economic Studies, U.S. Census Bureau.

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    More about this item

    Keywords

    globalization; international trade; export; entry; exit; heterogeneous firms; trade cost; technical barriers to trade (TBT); bayesian monte carlo markov chain (MCMC);
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

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