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 firmcharacteristiconanindicatorvariableforfirmsexport 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 (sothat c Xi =(1+ ) 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 . Afirms 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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