Firm Heterogeneity and the Geography of International Trade

Abstract

A key distinction which has emerged from heterogeneous firm models of international trade is that of exporting at the intensive and extensive margins. Empirically however, the two are often conflated, leading to biased estimates of the impact of falling trade costs. This paper exploits detailed firm level data, which includes information on the destination of exports to investigate causal links between enterprise productivity and the number of markets a firm serves as well as the relative size of those markets. Our focus is Sweden's Food and Beverage sector, which is not only highly open, but has been subject to policy induced changes in trade costs (as well as falling natural barriers) over our sample period. We have data on almost 10,000 firm / time / destination observations across 6 years and 138 destinations. Our results confirm that conflating adjustment at the internal and external margins does bias trade resistance effects. Combining detailed firm specific information with data on destination characteristics confirms the importance of a range of country specific characteristics (including exchange rate risk) and facilitates the estimation of both distance and market size elasticities, from firm level data.

Globalisation, multinationals and productivity in Japan’s lost decade

“…The industry-level measures attempt to capture the effects of globalisation on the probability of survival more generally and are measured by import penetration and intra-industry trade. We also include the measure of sunk costs used previously by Bernard and Jensen (2004) and Greenaway et al (2008a). The results from Table 4 suggest that the type of plants that are closed in Japan are similar to those found to exit when studies in other country contexts.…”

“…A consequence of this is the high share of exporters in the total population of firms. Greenaway et al (2008a) report for Sweden that exporters account for over 80% of the total number of firms. In our data the proportion of exporters is around 30%, a figure it is worth noting is likely to be biased upwards because export information is available only for firms with more than 50 employees.…”

Identifying the determinants of South Africa’s extensive and intensive trade margins: A gravity model approach

“…Similar to the approach in Greenaway et al (2009) and Christen et al (2013), the empirical model in this paper is derived from the seminal paper of Helpman et al (2008) whose model is based on the premise that firms are heterogeneous (as theorised by Melitz 2003), without using firm-level data. The gravity model is estimated with a twostage sample selection model using the estimation procedure proposed by Heckman (1979).…”

“…For example, Lawless (2010) focuses on trade costs, Debaere and Mostashari (2010) on tariffs, Dutt, Mihov and Van Zandt (2011) on the World Trade Organization, Baier, Bergstrand and Feng (2013) on economic integration agreements and Johannsen and Martínez-Zarzoso (2014) on international arms transfers. Of more relevance to this particular study, Greenaway, Gullstrand and Kneller (2009) apply a Heckman sample selection gravity model to control for possible self-selection into exporting using firm-level data on the Swedish food and beverage sector. Crozet and Koenig (2010), in turn, examine the impact of distance on the probability of exporting and on export levels, using French manufacturing firm-level data.…”

Determinants of Malawis cotton exports from 2001 to 2013

“…It was applied in the study on the basis that firms select themselves into export activities, and whether a firm elects to export to a market depends on its productivity level and the fixed costs of exporting to that particular market (Greenaway et al, 2009). The Laspyres index calculation method was used in the study.…”