“…If modified to allow for quality choice (as in Kugler and Verhoogen (2012)), this class of models would generate a positive relationship between input prices and export experience: as entrepreneurs become more capable (for exogenous reasons), firms grow and find it optimal to upgrade the quality of outputs and inputs. However, as emphasized by Arkolakis, Papageorgiou, and Timoshenko (2015) this class of models is unable to explain the age-dependence of growth rates (conditional on size) observed in the data.…”
Section: Introductionmentioning
confidence: 88%
“…This relationship holds both for total exports and exports in individual destinations, and prevails when controlling for initial export size. As emphasized by Arkolakis, Papageorgiou, and Timoshenko (2015) this feature of the data cannot be explained by models of random productivity evolution, but can be matched by models of learning about unobserved demand.…”
Section: Growth Size and Agementioning
confidence: 99%
“…To account for the joint observation of these patterns in the data, we introduce quality choice of outputs and inputs (Verhoogen, 2008;Kugler and Verhoogen, 2012) and learning about demand (Jovanovic, 1982;Arkolakis, Papageorgiou, and Timoshenko, 2015) into a Melitz (2003) model of monopolistic competition and firm heterogeneity. In the model, firms supply products of varying quality based on their beliefs about idiosyncratic expected demand.…”
Section: Introductionmentioning
confidence: 99%
“…A related class of models links firm dynamics in export markets to learning about unobserved demand (Albornoz et al, 2012;Chaney, 2014;Eaton et al, 2014;Ruhl and Willis, 2014;Timoshenko, 2015a,b;Arkolakis, Papageorgiou, and Timoshenko, 2015). While the microfoundations of the learning process vary across models, this body of work makes it possible to rationalize the age-dependence of export growth (conditional on size) observed in the data.…”
We document new facts about the evolution of firm performance and prices in international markets, and propose a theory of firm dynamics emphasizing the interaction between learning about demand and quality choice to explain the observed patterns. Using data from the Portuguese manufacturing sector, we find that: (1) firms with longer spells of activity in export destinations tend to ship larger quantities at lower prices; (2) older exporters tend to use more expensive inputs; (3) revenue growth within destinations (conditional on initial size) tends to decline with market experience; and (4) input prices and quantities tend to increase with revenue growth within firms. We develop a model of endogenous input and output quality choices in a learning environment that is able to account for these patterns. Counterfactual simulations reveal that minimum quality standards on traded goods reduce welfare by lowering entry in export markets and reallocating resources from old and large towards young and small firms.
“…If modified to allow for quality choice (as in Kugler and Verhoogen (2012)), this class of models would generate a positive relationship between input prices and export experience: as entrepreneurs become more capable (for exogenous reasons), firms grow and find it optimal to upgrade the quality of outputs and inputs. However, as emphasized by Arkolakis, Papageorgiou, and Timoshenko (2015) this class of models is unable to explain the age-dependence of growth rates (conditional on size) observed in the data.…”
Section: Introductionmentioning
confidence: 88%
“…This relationship holds both for total exports and exports in individual destinations, and prevails when controlling for initial export size. As emphasized by Arkolakis, Papageorgiou, and Timoshenko (2015) this feature of the data cannot be explained by models of random productivity evolution, but can be matched by models of learning about unobserved demand.…”
Section: Growth Size and Agementioning
confidence: 99%
“…To account for the joint observation of these patterns in the data, we introduce quality choice of outputs and inputs (Verhoogen, 2008;Kugler and Verhoogen, 2012) and learning about demand (Jovanovic, 1982;Arkolakis, Papageorgiou, and Timoshenko, 2015) into a Melitz (2003) model of monopolistic competition and firm heterogeneity. In the model, firms supply products of varying quality based on their beliefs about idiosyncratic expected demand.…”
Section: Introductionmentioning
confidence: 99%
“…A related class of models links firm dynamics in export markets to learning about unobserved demand (Albornoz et al, 2012;Chaney, 2014;Eaton et al, 2014;Ruhl and Willis, 2014;Timoshenko, 2015a,b;Arkolakis, Papageorgiou, and Timoshenko, 2015). While the microfoundations of the learning process vary across models, this body of work makes it possible to rationalize the age-dependence of export growth (conditional on size) observed in the data.…”
We document new facts about the evolution of firm performance and prices in international markets, and propose a theory of firm dynamics emphasizing the interaction between learning about demand and quality choice to explain the observed patterns. Using data from the Portuguese manufacturing sector, we find that: (1) firms with longer spells of activity in export destinations tend to ship larger quantities at lower prices; (2) older exporters tend to use more expensive inputs; (3) revenue growth within destinations (conditional on initial size) tends to decline with market experience; and (4) input prices and quantities tend to increase with revenue growth within firms. We develop a model of endogenous input and output quality choices in a learning environment that is able to account for these patterns. Counterfactual simulations reveal that minimum quality standards on traded goods reduce welfare by lowering entry in export markets and reallocating resources from old and large towards young and small firms.
“…important sources of exporters' success in international trade 1 (see, Eckel and Neary, 2010;Goldberg et al, 2010;Dhingra, 2013;Nocke and Yeaple 2014;Arkolakis et al 2015;Flach and Irlacher, 2015;Hottman et al, 2015). Introducing a new product or a new variety of existing products and thus expanding the product lines increase exporters' revenues in the global marketplace.…”
This paper explores the impact of input trade liberalization on export product scope of firms in industries with different scope for product differentiation. Firm-and industry-specific tariffs are measured to reflect cost effect (intensive margin) and new input effect (extensive margin) of input tariff reductions. Using tariff data and product-level trade data for 2002-2006, we find that while firms in differentiated product scope expand export product lines greatly, firms in non-differentiated product sector do not expand export product scope significantly, which is robust to different definitions of varieties.
This study examines whether government support for small and medium‐sized enterprises (SMEs), aimed at stimulating their growth, achieves its intended goal. We argue that government subsidies create the incentive for SMEs to remain small in order to keep receiving such support and thus SMEs are reluctant to grow. We call this phenomenon the Peter Pan syndrome. Using a dataset of Korean manufacturing firms during the period of 2010–2012, we find that the Peter Pan syndrome indeed exists and that the likelihood of the Peter Pan syndrome is conditioned by factors that influence their incentive to remain as SMEs.
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