Working Paper: CEPR ID: DP7956
Authors: Kristian Behrens; Gregory Corcos; Giordano Mion
Abstract: We provide an analysis of the 2008-2009 trade collapse using microdata from a small open economy, Belgium. First, we find that changes in firm-country-product exports and imports occurred mostly at the intensive margin: the number of firms, the average number of destination and origin markets per firm, and the average number of products per market changed only very little. Second, econometric analysis reveals some composition effects in the intensive margin fall along firm, product and country characteristics. The most important factor explaining changes in exports is the destination country's growth rate of GDP. Had growth rates in 2008--2009 been the same as in 2007--2008, Belgian exports would have fallen by about 57% less than what we observe. Trade in consumer durables and capital goods fell more severely than trade in other product categories, which explains another 22% of the observed fall. Financial variables and involvement in global value chains have some explanatory power on the exports and imports fall respectively, but appear to have affected domestic operations in equal proportion. More generally, exports-to-turnover and imports-to-intermediates ratios at the firm level did neither systematically decrease nor reveal strong firm- or sector-specific patterns. Overall, our results point to a demand-side explanation: the fall in trade was mostly driven by the fall in economic activity. It is not a trade crisis --- just a trade collapse
Keywords: Belgium; firm-level analysis; margins of trade; trade collapse; trade crisis
JEL Codes: F01; F10; F14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| GDP growth rate of destination countries (O57) | changes in exports (F14) |
| GDP growth rate of destination countries (O57) | Belgian exports (F10) |
| trade collapse (F19) | changes in average trade values per firm-country-product (F14) |
| financial variables (G32) | fall in exports (F14) |
| involvement in global value chains (F61) | fall in imports (F14) |
| demand for tradable goods (F19) | fall in trade (F19) |