Trade Liberalization and New Exporters' Size: A Test of Heterogeneous Firm Models

Rosen Marinov (), Nadia Rocha and DiNino Virginia ()
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DiNino Virginia: Graduate Institute of International Studies
Authors registered in the RePEc Author Service: Virginia Di Nino

The B.E. Journal of Economic Analysis & Policy, 2008, vol. 8, issue 1, 1-14

Abstract: This paper tests an empirical implication of heterogeneous firm models along the lines of Melitz (2003) in the context of falling trade costs. Using the EU's intensive liberalization phase (1993-2002) as a natural experiment, we investigate freer trade's impact on the frequency of market reorientation across the productivity distribution of active firms to shed light on the presence of a minimum productivity (size) threshold for profitable sales abroad. Contrary to the models' predictions, firms that switch from non-exporting to exporting over the studied period are not concentrated in a particular size range. Our findings, based on a rich data set of French manufacturing enterprises, suggest a scope for fine-tuning of the theoretical framework.

Date: 2008
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DOI: 10.2202/1935-1682.1735

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