Working Paper: NBER ID: w13054
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: international trade; exporting firms; productivity; firm heterogeneity; trade liberalization
JEL Codes: F1; F2; L1; L2; L6
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Higher productivity (O49) | Greater likelihood of exporting (F10) |
| Firm size/productivity (L25) | Export status (Y10) |
| Self-selection of high-productivity firms (D22) | Exporting markets (F10) |
| Trade liberalization (F13) | Resource reallocation towards higher productivity firms (D22) |
| Resource reallocation towards higher productivity firms (D22) | Aggregate productivity (E23) |
| Exporting (F10) | Firm growth in employment and output (O49) |
| Exporting firms (F10) | More capital and skill-intensive (D29) |
| Exporting (F10) | Productivity enhancement (O49) |
| Productivity enhancement (O49) | Likelihood of further export engagement (F10) |