Trade costs, firms and productivity $

Published on Jul 1, 2006in Journal of Monetary Economics2.444
· DOI :10.1016/j.jmoneco.2006.05.001
Andrew B. Bernard43
Estimated H-index: 43
(Dartmouth College),
J. Bradford Jensen30
Estimated H-index: 30
Peter K. Schott34
Estimated H-index: 34
(Yale University)
This paper examines the response of U.S. manufacturing industries and plants to changes in trade costs using a unique new dataset on industry-level tariff and transportation rates. Our results lend support to recent heterogeneous-firm models of international trade that predict a reallocation of economic activity towards high-productivity firms as trade costs fall. We find that industries experiencing relatively large declines in trade costs exhibit relatively strong productivity growth. We also find that low-productivity plants in industries with falling trade costs are more likely to die; that relatively high-productivity non-exporters are more likely to start exporting in response to falling trade costs; and that existing exporters increase their shipments abroad as trade costs fall. Finally, we provide evidence of productivity growth within firms in response to decreases in industry-level trade costs.
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