The Mutable Geography of Firms' International Trade: Evidence and Macroeconomic Implications

Lu Han

No 201909, Working Papers from University of Liverpool, Department of Economics

Abstract: Exporters add and drop destination markets in response to a variety of global, national and industry-specific shocks. This paper develops empirical measures of these market changes and documents a set of key stylized facts using the customs databases of China (2000-2006) and the United Kingdom (2010-2016). First, I find within-firm changes in destination markets involve large trade values and 30-40% of all market changes involve simultaneously adding and dropping markets. Second, around 20% of within-firm market changes are driven by fluctuations in bilateral exchange rates and local CPI measures. Taken together, these facts suggest that firms face large destination-specific fluctuations in the demand for their products. Third, while adding and dropping markets, firms simultaneously adjust prices and quantities across all other destinations they serve. I build a multi-country general equilibrium model to investigate the channels that can generate the observed data patterns and study the aggregate implications of mutable markets (within-firm market changes) on the distribution of markups, trade volumes, and welfare. Applying the multi-country model to analysis of a bilateral trade war, I find that aggregate productivity for countries directly involved in the trade war drops more (1-2%) and that of countries not involved rises more (8-10%) when firms endogenously vary their markets in response to the new conditions of competition in local markets induced by the bilateral trade war.

Pages: 60 pages
Date: 2019-09
New Economics Papers: this item is included in nep-ifn, nep-int and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations:

Forthcoming

Downloads: (external link)
https://www.liverpool.ac.uk/media/livacuk/schoolof ... nation,to,Growth.pdf First version, 2019 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:liv:livedp:201909

Access Statistics for this paper

More papers in Working Papers from University of Liverpool, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Rachel Slater ().