Working Paper: NBER ID: w9639
Authors: Andrew B. Bernard; J. Bradford Jensen; Peter K. Schott
Abstract: This paper examines the response of industries and firms to changes in trade costs. Several new firm-level models of international trade with heterogeneous firms predict that industry productivity will rise as trade costs fall due to the reallocation of activity across plants within an industry. Using disaggregated U.S. import data, we create a new measure of trade costs over time and industries. As the models predict, productivity growth is faster in industries with falling trade costs. We also find evidence supporting the major hypotheses of the heterogenous-firm models. Plants in industries with falling trade costs are more likely to die or become exporters. Existing exporters increase their shipments abroad. The results do not apply equally across all sectors but are strongest for industries most likely to be producing horizontally-differentiated tradeable goods.
Keywords: No keywords provided
JEL Codes: F1; L1; L6
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Falling trade costs (F12) | Rising industry productivity (O49) |
| Lower trade costs (F19) | Exit of less productive firms (L19) |
| Lower trade costs (F19) | Entry of more productive non-exporting firms into export market (F14) |
| Falling trade costs (F12) | Increased export shipments by existing exporters (F10) |
| Declining trade costs (F12) | Higher probability of plant death in certain industries (L79) |