Working Paper: CEPR ID: DP6277
Authors: Andrew B. Bernard; J. Bradford Jensen; Stephen J. Redding; Peter K. Schott
Abstract: Despite the fact that importing and exporting are extremely rare firm activities, economists generally devote little attention to the role of firms when discussing international trade. This paper summarizes key differences between trading and non-trading firms, demonstrates how these differences present a challenge to standard trade models and shows how recent 'heterogeneous-firm' models of international trade address these challenges. We then make use of transaction-level U.S. trade data to introduce a number of new stylized facts about firms and trade. These facts reveal that the extensive margins of trade - that is, the number of products firms trade as well as the number of countries with which they trade - are central to understanding the well-known role of distance in dampening aggregate trade flows.
Keywords: heterogeneous firms; international trade; new trade theory; old trade theory
JEL Codes: F10; F11; F12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| exporting firms (F10) | larger firm size (L25) |
| exporting firms (F10) | higher productivity (O49) |
| exporting firms (F10) | higher wages (J39) |
| higher productivity of exporting firms (F14) | reallocation of resources (D61) |
| reallocation of resources (D61) | enhanced overall productivity (O49) |
| trade liberalization (F13) | faster growth in employment among exporters (F10) |
| trade liberalization (F13) | faster growth in output among exporters (F14) |
| self-selection of firms into export markets (L25) | high-productivity firms survive and grow (L25) |
| lower-productivity firms (D22) | more likely to fail (D29) |
| firms entering export markets (F23) | grow faster (O42) |
| growth of high-productivity firms (O49) | enhances overall industry productivity (O49) |