ECTA8318-2-1 - http:/www.econometricsociety.org/...

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http://www.econometricsociety.org/ Econometrica , Vol. 79, No. 5 (September, 2011), 1453–1498 AN ANATOMY OF INTERNATIONAL TRADE: EVIDENCE FROM FRENCH FIRMS JONATHAN EATON Pennsylvania State University, University Park, PA 16802, U.S.A. SAMUEL KORTUM University of Chicago, Chicago, IL 60637, U.S.A. FRANCIS KRAMARZ CREST (ENSAE), 92245, Malakoff, France The copyright to this Article is held by the Econometric Society. It may be downloaded, printed and reproduced only for educational or research purposes, including use in course packs. No downloading or copying may be done for any commercial purpose without the explicit permission of the Econometric Society. For such commercial purposes contact the Office of the Econometric Society (contact information may be found at the website http://www.econometricsociety.org or in the back cover of Econometrica ). This statement must be included on all copies of this Article that are made available electronically or in any other format.
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Econometrica , Vol. 79, No. 5 (September, 2011), 1453–1498 AN ANATOMY OF INTERNATIONAL TRADE: EVIDENCE FROM FRENCH FIRMS BY JONATHAN EATON,SAMUEL KORTUM, AND FRANCIS KRAMARZ 1 We examine the sales of French manufacturing firms in 113 destinations, including France itself. Several regularities stand out: (i) the number of French firms selling to a market, relative to French market share, increases systematically with market size; (ii) sales distributions are similar across markets of very different size and extent of French participation; (iii) average sales in France rise systematically with selling to less popular markets and to more markets. We adopt a model of firm heterogeneity and export participation which we estimate to match moments of the French data using the method of simulated moments. The results imply that over half the variation across firms in market entry can be attributed to a single dimension of underlying firm het- erogeneity: efficiency. Conditional on entry, underlying efficiency accounts for much less of the variation in sales in any given market. We use our results to simulate the ef- fects of a 10 percent counterfactual decline in bilateral trade barriers on French firms. While total French sales rise by around $16 billion (U.S.), sales by the top decile of firms rise by nearly $23 billion (U.S.). Every lower decile experiences a drop in sales, due to selling less at home or exiting altogether. KEYWORDS: Export destinations, firms, efficiency, sales distribution, simulated mo- ments. 1. INTRODUCTION WE EXPLOIT DETAILED DATA on the exports of French firms to confront a new generation of trade theories. These theories resurrect technological het- erogeneity as the force that drives international trade. In Eaton and Kortum ( 2002 ), differences in efficiencies across countries in making different goods determine aggregate bilateral trade flows. Since they focused only on aggre- gate data, underlying heterogeneity across individual producers remains hid- den. Subsequently, Melitz ( 2003 ) and Bernard, Eaton, Jensen, and Kortum ( 2003
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ECTA8318-2-1 - http:/www.econometricsociety.org/...

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