The Intensive Margin in Trade

Abstract

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The double EMG distribution and trade elasticities

“…() and Fernandes et al. () assumes that the underlying labour productivity φ is drawn from a log‐normal distribution, . In this case, equals φ ε −1 , and follows a normal distribution, where μ = m ( ε −1) and σ 2 = υ 2 ( ε −1) 2 .…”

“…Second, we follow Fernandes et al. () in requiring at least 100 firms be present within a destination–year observation.…”

Decomposing episodes of large growth in international trade

“…I match the production data to US export data at the 6-digit NAICS level for the same destination countries as the bilateral trade data. 12 As documented by works like Armenter and Koren (2014), Fernandes et al (2015), and Alessandria et al (2010), international trade data often suffers from issues of sparseness and lumpiness in monthly and annual shipments. To smooth these anomalies, I use a 3-year average to control for reporting errors in the timing of shipments, or instances of shipment and customs reports being dispersed over multiple years.…”

Economic Development and the Margins of Trade: Are the Least Developed Countries Different?

“…Two main developments stand out in the growing literature on trade and economic development: More papers now focus on the dynamics of trade, and more scholars now show the separate contributions of the intensive and extensive margins to export growth—how incumbents, exiters and entrants shape aggregate export values (e.g., Díez, Mora, and Spearot 2018; Fernandes, Freund, and Pierola 2016). The literature has grown, expanding from early papers on high‐income economies (e.g., Bernard et al 2007; Eaton, Kortum, and Kramarz 2011), to recent papers that cover countries with a broader range of gross domestic product (GDP) per capita (e.g., Fernandes et al 2015; Fernandes, Freund, and Pierola 2016; Freund and Pierola 2015). This growing literature on trade dynamics suggests that economic development, as measured by GDP per capita, plays a role in supporting exports, so that we observe large differences between the export profiles of high‐income countries and the least developed countries.…”

“…The shape of firm‐size distributions matter, as long as increasing GDP per capita is linked to institutional changes that lower trade costs. As part of the debate, Fernandes et al (2015) develop a Melitz‐style model of exporting, but with a log‐normal distribution of productivity. With this innovation, half of the variation in exports is expected to occur along the intensive margin, (as opposed to how the extensive margin explains all the variation in exports in a Melitz–Pareto model).…”