Special Report on
Firm Heterogeneity And International Trade
Firm Heterogeneity And International Trade - Trends
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We develop a stochastic, general equilibrium, two-country model of trade and macroeconomic dynamics. Productivity differs across individual, monopolistically competitive firms in each country. Firms face some initial uncertainty concerning their future productivity when making an irreversible investment to enter the domestic market. In addition to the sunk entry cost, firms face both fixed and per-unit export costs. Only a subset of relatively more productive firms export, while the remaining, less productive firms only serve their domestic market. This microeconomic structure endogenously determines the extent of the traded ...
The trading behaviour of firms has received increasing research attention over the last two decades. As a general result, exporters turn out to be very different from the typical firm: they are larger, more productive, more capital and skill-intensive (Aw and Hwang, 1995; Bernard and Jensen, 1995). These findings have been largely documented at both the firm and the plant level for a wide range of countries. A recent empirical work (The International Study Group on Export and Productivity, 2007) looks at the relationship between export and productivity by using comparable micro level panel ... Read More
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