EAT2008ANA - An Anatomy of International Trade: Evidence...

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Unformatted text preview: An Anatomy of International Trade: Evidence from French Firms Jonathan Eaton, 1 Samuel Kortum, 2 and Francis Kramarz 3 August 2008 1 New York University ([email protected]). 2 University of Chicago ([email protected]). 3 CREST-INSEE and CEPR ([email protected]). Abstract We examine the cross section of sales of French manufacturing &rms in 113 destinations, including France itself. Several regularities stand out: For example: (1) the number of French &rms selling to a market, relative to French market share, increases systematically with market size; (2) sales distributions are very similar across markets of very di/erent size and extent of French participation; (3) Average sales in France rise very systematically with selling to less popular markets and to more markets. We adopt a model of &rm heterogeneity and export participation which we estimate to match moments of the French data using the method of simulated moments. The results imply that nearly half the variation across &rms that we see in market entry can be attributed to a single dimension of underlying &rm heterogeneity, e¢ ciency. Conditional on entry underlying e¢ ciency accounts for a much smaller variation in sales in any given market. Parameter estimates imply that &xed costs eat up a little more than half of gross pro&ts. We use our results to simulate the e/ects of a counterfactual decline in bilateral trade barriers on French &rms. The average &rm in the top decile experiences signi&cant expansion in total sales while average &rms in lower deciles su/er losses or exit altogether. 1 Introduction We exploit a detailed set of data on the exports of French &rms to confront a new generation of trade theories. The data, from French customs, report the sales of over 200,000 individual &rms to over 100 individual markets in a cross section. We ask how well the model of the export behavior of heterogeneous &rms introduced by Melitz (2003) and more concretely speci&ed by Helpman, Melitz, and Yeaple (2004) and Chaney (2008) stands up to these data. Basic elements of the model are that &rms¡e¢ ciencies follow a Pareto distribution, demand is Dixit-Stiglitz, and markets are separated by iceberg trade barriers and require a &xed cost of entry. The model is the simplest one we can think of that can square with the facts. With this basic model in mind, we extract &ve relationships that underlie the data: (1) how entry varies with market size, (2) how the distribution of sales varies across markets, (3) how &rms enter multiple markets, (4) how export participation abroad connects with sales at home, and (5) how sales abroad relate to sales at home. Through the haze of numbers we begin to see the outlines of the basic model, and even rough magnitudes of some parameters....
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This note was uploaded on 01/16/2012 for the course BI 200 taught by Professor Potter during the Fall '11 term at Montgomery College.

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EAT2008ANA - An Anatomy of International Trade: Evidence...

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