lec11-eco101-11

lec11-eco101-11 - InternationalTrade Lecture11 c ⃝...

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Unformatted text preview: InternationalTrade Lecture11 c ⃝ Marc-AndreasMuendler UniversityofCalifornia,SanDiego November1,2011 11.DiverseFirms,Trade,andReallocation Econ101, c ⃝ M.Muendler HeterogeneousFirmsandTrade • Inpractice,nontradedvarietiesariseevenwithinindustries • Non-exportersandexporterscoexist • Whatexplainstheirdifferenttradingbehavior? • Firmsdifferininnateindividualcharacteristics:consumerappeal, quality,productivity • Revisitmonopolisticcompetition,withdiversityinmarginalcosts 11.DiverseFirms,Trade,andReallocation Econ101, c ⃝ M.Muendler ExporterPremiainU.S.Manufacturing2002 Comparison (inpercent) anyindustry sameindustry sameindustry andgivenfirmsize Employment 229% 164% Sales 339% 194% 8% Value-addedperworker 30% 12% 11% Totalfactorproductivity 2% 3% 5% Averagewage 19% 6% 6% Capitalperworker 38% 13% 4% Sharenon-productionworkers 21% 12% 21% Source :Bernard,Jensen,Redding&Schott(2007). Note :ResultsfromOLSregressionsofthe log firmcharacteristiconanindicatorvariableforfirm’sexport statusandcontrols(industryfixedeffectand log employment). 11.DiverseFirms,Trade,andReallocation Econ101, c ⃝ M.Muendler SuperiorExporterPerformance • Superiorexporterperformance:Isitlearningfromexporting? Orisitthesortingofthehighlycompetitivefirmsintoexportmarkets? • Evidencepointstothesortingofthemostcompetitivefirmsintoex- portmarkets • Onlythehighlycompetitivefirmscangeneratetherevenuesandprof- itstocoverthefixedcostsofexporting • Melitz(2003):Firmdynamicsandtradeopenness 11.DiverseFirms,Trade,andReallocation 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 11.DiverseFirms,Trade,andReallocation 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 ) 11.DiverseFirms,Trade,andReallocation Econ101, c ⃝ M.Muendler DemandforEachVarietyatHome Q i = S · [ 1 n- b · ( P i- ¯ P ) ] • 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 ) 11.DiverseFirms,Trade,andReallocation Econ101,...
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lec11-eco101-11 - InternationalTrade Lecture11 c ⃝...

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