Working Paper: CEPR ID: DP8256
Authors: Julian Emami Namini; Giovanni Facchini; Ricardo Lopez
Abstract: Empirical evidence suggests that sectoral export growth decreases exporters' survival probability, whereas non--exporters are unaffected. Models with firm heterogeneity in total factor productivity predict the opposite. To solve this puzzle, we develop a two--factor framework where firms differ in factor shares. In this model, export growth increases competition for the factor used intensively by exporters, eliminating some of them, while non--exporters benefit. Our empirical analysis shows that the forces highlighted in the model drive the firm selection experienced by the Chilean manufacturing sector, suggesting that heterogeneity in factor shares is crucial to understand how firms react to trade liberalization.
Keywords: Chile; Firm Dynamics; Firm Heterogeneity in Factor Shares; Manufacturing Industry; Two-Factor Trade Model
JEL Codes: F12; F14; F16; L11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| sector-wide exports (F10) | survival probability of exporting firms (F10) |
| sector-wide exports (F10) | exit from the market of exporting firms (L19) |
| sector-wide exports (F10) | availability of factors for non-exporters (F29) |
| factor intensities (C26) | survival probability of exporting firms (F10) |
| sector-wide total factor productivity (TFP) (O49) | exit from the market of exporting firms (L19) |