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Trade costs, firms and productivity $

Published on Jul 1, 2006in Journal of Monetary Economics2.44
· DOI :10.1016/j.jmoneco.2006.05.001
Andrew B. Bernard42
Estimated H-index: 42
(Dartmouth College),
J. Bradford Jensen30
Estimated H-index: 30
,
Peter K. Schott32
Estimated H-index: 32
(Yale University)
Cite
Abstract
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.
  • References (58)
  • Citations (353)
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References58
Newest
Published on May 1, 2007in The Review of Economics and Statistics3.64
Andrew B. Bernard42
Estimated H-index: 42
(Dartmouth College),
J. Bradford Jensen30
Estimated H-index: 30
Plant shutdowns shape industry productivity, the dynamics of employment, and industrial restructuring. Plant closures account for more than half of gross job destruction in US manufacturing. This paper examines the effects of firm structure on US manufacturing plant closures. Plants belonging to multi-plant firms and those owned by US multinationals are less likely to exit. However, the superior survival chances are due to the characteristics of the plants rather than the nature of the firms. Co...
Published on Dec 21, 2006
Robert Salomon17
Estimated H-index: 17
Published on Dec 1, 2005in Journal of International Economics2.22
Johannes Van Biesebroeck20
Estimated H-index: 20
(U of T: University of Toronto)
Abstract Proponents of trade liberalization argue that exporting helps firms to achieve higher productivity levels. This hypothesis is examined for a panel of manufacturing firms in nine African countries. The results indicate that exporters in these countries are more productive and, more importantly, exporters increase their productivity advantage after entry into the export market. While the first finding can be explained by selection–only the most productive firms engage in exporting–the lat...
Published on Nov 1, 2005in Canadian Journal of Economics
Roberto Alvarez E.17
Estimated H-index: 17
(University of Chile),
Ricardo A. López11
Estimated H-index: 11
(IU: Indiana University)
Recent empirical evidence documents the superior characteristics of exporters relative to non-exporters. Three explanations for this phenomenon have been proposed: self-selection; learning-by-exporting; and conscious self-selection. We test these three hypotheses using plant-level data from Chile. We find that plants that enter international markets show superior initial performance compared with non-exporters, consistent with self-selection; we observe increases in productivity after plants beg...
Published on Jan 1, 2004
Marc-Andreas Muendler18
Estimated H-index: 18
(UCSD: University of California, San Diego)
Brazil's trade liberalization between 1990 and 1993, and its partial reversal in 1995, are used to study how reduced inward trade barriers affect productivity. The production function of Brazilian manufacturers is estimated at the ISIC3 two-digit level under various alternatives, including an extension of Olley and Pakes' (1996) procedure. Firm-level productivity is inferred and then related to trade. Findings suggest that (1) foreign competition pressures firms to raise productivity markedly, w...
Published on Nov 1, 2003in Econometrica4.28
Marc J. Melitz29
Estimated H-index: 29
(Harvard University)
This paper develops a dynamic industry model with heterogeneous firms to analyze the intra-industry effects of international trade. The model shows how the exposure to trade will induce only the more productive firms to enter the export market (while some less productive firms continue to produce only for the domestic market) and will simultaneously force the least productive firms to exit. It then shows how further increases in the industry's exposure to trade lead to additional inter-firm real...
Published on Oct 1, 2003in National Bureau of Economic Research
Johannes Van Biesebroeck20
Estimated H-index: 20
(U of T: University of Toronto)
Proponents of trade liberalization argue that it will force firms to produce closer to the production possibility frontier and that the frontier will move out faster. In particular, plants that export will achieve a higher productivity level. However intuitive the argument, empirical evidence is meager. This hypothesis is examined by calculating the effect of export status on productivity for a panel of manufacturing plants in nine African countries. The results indicate that exporters in these ...
Published on Jun 4, 2003in Journal of International Economics2.22
Andrew B. Bernard42
Estimated H-index: 42
(Dartmouth College),
J. Bradford Jensen30
Estimated H-index: 30
,
Peter K. Schott32
Estimated H-index: 32
This paper examines the role of international trade in the reallocation of U.S. manufacturing within and across industries from 1977 to 1997. Motivated by the factor proportions framework, we introduce a new measure of industry exposure to international trade that focuses on where imports originate rather than on their overall level. We find that plant survival and growth are negatively associated with industry exposure to low-wage country imports. Within industries, we show that manufacturing a...
Published on May 20, 2003in Journal of International Economics2.22
Ana M. Fernandes17
Estimated H-index: 17
(World Bank)
Fernandes explores Colombian trade policy from 1977-91, a period of substantial variation in protection across industries, to examine whether increased exposure to foreign competition generates plant-level productivity gains. Using a large panel of manufacturing plants, she finds a strong positive impact of tariff liberalization on consistent productivity estimates, controlling for plant and industry heterogeneity. This result is not driven by the endogeneity of protection nor by plant exit. The...
Published on Jan 13, 2003
David Hummels29
Estimated H-index: 29
(U of C: University of Chicago)
July 1999 While the precise causes of post-war trade growth are not well understood, declines in transport costs top the lists of usual suspects. However, there is remarkably little systematic evidence documenting the decline. This paper provides a detailed accounting of the time-series pattern of shipping costs. Direct evidence from an eclectic mix of data shows that ocean freight rates have increased while air freight rates have declined rapidly. Indirect evidence suggests that the cost of ove...
Cited By353
Newest
Published on May 15, 2019in Journal of Finance6.20
Jean-Noel Barrot5
Estimated H-index: 5
(MIT: Massachusetts Institute of Technology),
Erik Loualiche3
Estimated H-index: 3
(MIT: Massachusetts Institute of Technology),
Julien Sauvagnat5
Estimated H-index: 5
(Bocconi University)
We investigate how globalization is reflected in asset prices. We use shipping costs to measure firms' exposure to globalization. Firms in low shipping cost industries carry a 8 percent risk premium, suggesting that their cash-flows covary negatively with investors' marginal utility. We find that the premium emanates from the risk of displacement of least efficient firms triggered by import competition. These findings suggest that foreign productivity shocks are associated with times when consum...
Aya Elewa (INRA: Institut national de la recherche agronomique)
This paper analyzes how Egyptian manufacturing plants respond to changes in trade tariffs using firm-level data from the World Bank Enterprise Survey. Using Levinsohn and Petrin (Rev Econ Stud 70(2):317–341, 2003) methodology to calculate the total factor productivity for the Egyptian firms in the sample, the results stand in line with the heterogeneous-firm models of international trade predicting that fall in trade costs leads to a decrease in the market shares of domestic firms. The decrease ...
Published on Sep 27, 2018in Review of Financial Studies4.97
Sreedhar T. Bharath16
Estimated H-index: 16
(ASU: Arizona State University),
Michael G. Hertzel15
Estimated H-index: 15
(ASU: Arizona State University)
This paper examines how external governance pressure provided by both the product market and the market for corporate control affects the type of debt that firms issue. Consistent with a governance substitution effect, we find that (i) an exogenous increase in governance pressure from the product market has a significant negative impact on the use of bank financing over public debt issuance, and (ii) an exogenous decrease in governance pressure from the takeover market has a significant positive...
Published on Aug 22, 2019in Journal of Financial Research1.09
Carlos Pestana Barros44
Estimated H-index: 44
(University of Paris),
Lamia Chourou2
Estimated H-index: 2
(U of O: University of Ottawa)
+ 1 AuthorsSyrine Sassi1
Estimated H-index: 1
(University of Paris)
Published on Aug 1, 2019in Global Finance Journal
Marcia Millon Cornett27
Estimated H-index: 27
(Bentley University),
Otgontsetseg Erhemjamts5
Estimated H-index: 5
(Bentley University),
Hassan Tehranian30
Estimated H-index: 30
(BC: Boston College)
Abstract We find a U-shaped relation between industry concentration and innovation. The relation is driven by neck-and-neck industries where firms operate with similar productivity. When industry concentration is low, innovation intensity decreases as concentration increases. However, when industry concentration is high, increased concentration causes industry firms to increase innovation intensity to escape competition. The U-shaped relation is more pronounced in industries where firms compete ...
Published on Jul 1, 2019in Journal of International Economics2.22
Leonardo Baccini11
Estimated H-index: 11
(LSE: London School of Economics and Political Science),
Giammario Impullitti8
Estimated H-index: 8
(University of Nottingham),
J MaleskyEdmund20
Estimated H-index: 20
(Duke University)
What do state-owned enterprises (SOEs) do? How do they respond to market incentives? Can we expect substantial efficiency gains from trade liberalization in economies with a strong presence of SOEs? Using a new dataset of Vietnamese firms we document a set of empirical regularities distinguishing SOEs from private firms. We embed some of these features characterizing SOEs operations in a model of trade with firm heterogeneity and show that they can hinder the selection effects of openness and ta...
Steven Brakman29
Estimated H-index: 29
(UG: University of Groningen),
Harry Garretsen36
Estimated H-index: 36
(UG: University of Groningen)
+ 1 AuthorsPeter Zwaneveld
Published on May 7, 2019
Andrzej Cieślik10
Estimated H-index: 10
,
Jan Jakub Michałek6
Estimated H-index: 6
,
Iryna Gauger1
Estimated H-index: 1
The main goal of this paper is to empirically investigate the regional dimension of productivity determinants for 24 regions of Ukraine using micro-level dataset for individual firms in 2013. The novelty of our analysis is the comparison of the determinants of productivity in the manufacturing and service sectors. We estimate both pooled regressions for all regions and separate regressions for particular regions. The estimation results obtained for the entire country demonstrate that the majorit...
Published on May 1, 2019in Journal of International Economics2.22
Brian J Asquith1
Estimated H-index: 1
,
Sanjana Goswami1
Estimated H-index: 1
(UCI: University of California, Irvine)
+ 1 AuthorsAntonio Rodriguez-Lopez4
Estimated H-index: 4
(UABC: Autonomous University of Baja California)
Abstract International trade exposure affects job flows along the intensive margin (from expansions and contractions of firms' employment) as well as along the extensive margin (from births and deaths of firms). This paper uses 1992–2011 employment data from U.S. establishments to construct job flows at both the industry and commuting-zone levels, and then estimates the impact of the ‘China shock’ on each job-flow type. Using the two most influential measures of Chinese exposure, we find that th...
Published on Apr 23, 2019in Review of Financial Studies4.97
Dominique C. Badoer2
Estimated H-index: 2
(UIC: University of Illinois at Chicago),
Evan Dudley5
Estimated H-index: 5
(Queen's University),
Christopher M. James38
Estimated H-index: 38
(UF: University of Florida)
This paper examines how exogenous shocks to volatility affect the priority structure of corporate debt. We argue that increases in volatility reduce corporate debt capacity and increase the potential for dilution of existing debt holders. We hypothesize that as the potential for dilution increases, debt holders will attempt to mitigate dilution by establishing priority through collateral grants rather than through negative pledge covenants. More important, we hypothesize that increases in volati...
View next paperPlants and Productivity in International Trade