lec10-eco101-10

lec10-eco101-10 - InternationalTrade Lecture10 c...

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Unformatted text preview: InternationalTrade Lecture10 c Marc-AndreasMuendler UniversityofCalifornia,SanDiego October28,2010 10.Trade,Exporters,andFirmDynamics Econ101, c M.Muendler HeterogeneousFirmsandTrade • Inpractice,nontradedvarietiesariseevenwithinindustries • Non-exportersandexporterscoexist • Whatexplainstheirdifferenttradingbehavior? • Firmsdifferininnateindividualcharacteristics:consumerappeal, quality,productivity • Revisitmonopolisticcompetition,withdiversityinmarginalcosts 10.Trade,Exporters,andFirmDynamics Econ101, c M.Muendler ExporterPremiainU.S.Manufacturing2002 Comparison (inpercent) anyindustry sameindustry sameindustry andgivenfirmsize Employment 119% 97% Sales 148% 108% 8% Value-addedperworker 26% 11% 10% Totalfactorproductivity 2% 3% 5% Averagewage 17% 6% 6% Capitalperworker 32% 12% 4% Sharenon-productionworkers 19% 11% 19% Source :Bernard,Jensen,Redding&Schott(2007). Note :ResultsfromOLSregressionsofthe log firmcharacteristiconanindicatorvariableforfirm’sexport statusandcontrols(industryfixedeffectand log employment). 10.Trade,Exporters,andFirmDynamics Econ101, c M.Muendler SuperiorExporterPerformance • Superiorexporterperformance:Isitlearningfromexporting? Orisitthesortingofthehighlycompetitivefirmsintoexportmarkets? • Evidencepointstothesortingofthemostcompetitivefirmsintoex- portmarkets • Onlythehighlycompetitivefirmscangeneratetherevenuesandprof- itstocoverthefixedcostsofexporting • Melitz(2003):Firmdynamicsandtradeopenness 10.Trade,Exporters,andFirmDynamics Econ101, c M.Muendler HeterogeneousFirmsandExport-marketEntry • Basicingredients(assumptions) – Numberoffactorsofproduction:1(labor) – Factormobility:Acrossfirms(notacrosscountries) – Numberoffirms(varieties): N – Numberofcountries:2(homeandforeign * ) – Imperfectcompetition,variabletransportcosts,fixedentrycosts – Keyforce :Differencesintechnologiesbetweenfirms 10.Trade,Exporters,andFirmDynamics Econ101, c M.Muendler FirmHeterogeneity • Firmsdifferintheirmarginalcost c i Foreveryfirm i ,marginalcostisconstant Marketaverageinequilibrium: ¯ c = 1 n ( c 1 + ... + c n ) • SimilartoaRicardianmodel, c i = w · a i justthatnow a i differsbetweenfirmsevenwithinthesameindustry • Tostartproduction,firmshavetopayafixed(sunk)cost F • Toexporttotheforeignmarket,firmshavetopayanadditionalfixed cost F X andavariabletransportcost τ (sothat c Xi =(1+ τ ) · c i ) 10.Trade,Exporters,andFirmDynamics Econ101, c M.Muendler DemandforEachVarietyatHome Q i = S · h 1 n- b · ( P i- ¯ P ) i • Demand Q i foranindividualfirm i ’s variety dependsontotalsalesin themarket S ,thenumberoffirmsinthemarket n ,itsownprice P i andaveragemarketprice ¯ P . b isresponsivenessofquantitytoprice. • Firm i hasinversedemand: P d ( Q i )= ¯ P +[1 / ( b · n )]- [1 / ( Sb )] · Q i . • Welookat asymmetricequilibrium . Afirm’s P i willdifferfromaverageprice ¯ P = 1 n ( P 1 + ... + P n ) 10.Trade,Exporters,andFirmDynamics Econ101, c M.Muendler OptimalQuantityandPrice Q i = Sb 2 ¯...
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This note was uploaded on 05/01/2011 for the course ECON 101 taught by Professor Jacobson during the Spring '03 term at UCSD.

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lec10-eco101-10 - InternationalTrade Lecture10 c...

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