Working Paper: CEPR ID: DP12829
Authors: Gino Gancia; Alessandra Bonfiglioli; Rosario Crin
Abstract: This paper uses US import data to compare firms from multiple origins in a single destination. Guided by structural equations, we decompose countries' market shares into the contribution of the number of firm-products, their average attributes (quality and unit values) and reallocations among heterogeneous firms. We show that heterogeneity in attributes is important for explaining average exports and why these are higher from richer and larger countries. While we find evidence consistent with selection and misallocation, they do not seem the sole drivers of the results. In conclusion, reallocations among heterogeneous firms are important for trade, economic development and welfare.
Keywords: US imports; firm heterogeneity; international trade; prices; quality; misallocation
JEL Codes: F12; F14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| larger and richer countries (O57) | higher average sales per firm (L25) |
| GDP per capita (O49) | average sales per firm (L25) |
| population size (J11) | presence of more top firms (L19) |
| reallocations among heterogeneous firms (F12) | cross-country variation in average sales per firm product (L25) |
| average attributes of firms and dispersion of attributes (L25) | export performance (F17) |
| selection effects (C52) | distribution of firm characteristics across countries (L25) |
| less appealing firms export from countries (F14) | market share in a given industry (L19) |
| selection influences volume of exports and dispersion of observed sales (F14) | distribution of sales (D39) |