Working Paper: NBER ID: w22727
Authors: Andrew B. Bernard; J. Bradford Jensen; Stephen J. Redding; Peter K. Schott
Abstract: Research in international trade has changed dramatically over the last twenty years, as attention has shifted from countries and industries towards the firms actually engaged in international trade. The now-standard heterogeneous firm model posits measure zero firms that compete under monopolistic competition and decide whether to export to foreign markets. However, much of international trade is dominated by a few “global firms,” which participate in the international economy along multiple margins and account for substantial shares of aggregate trade. We develop a new theoretical framework that allows firms to have large market shares and to decide simultaneously on the set of production locations, export markets, input sources, products to export, and inputs to import. Using U.S. firm and trade transactions data, we provide strong evidence in support of this framework's main predictions of interdependencies and complementarities between these margins of firm international participation. Global firms participate more intensively along each margin, magnifying the impact of underlying differences in firm characteristics, and increasing their shares of aggregate trade.
Keywords: No keywords provided
JEL Codes: F12; F14; L11; L21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| fixed costs associated with exporting (F10) | firm revenues (G30) |
| firm revenues (G30) | likelihood of importing inputs from various countries (F10) |
| decision to incur fixed costs for sourcing inputs from one country (F23) | lower production costs (D24) |
| lower production costs (D24) | likelihood of sourcing from additional countries (F69) |
| exporting decisions (F10) | importing decisions across countries (F29) |
| firms with larger market shares (L10) | influence market prices (D41) |
| productivity differences among firms (L25) | effects on sales and employment (J23) |
| small productivity differences (D29) | significant variations in export and import activities (F10) |