The Intensive Margin in Trade: How Big and How Important?

Ana M. Fernandes, Peter J. Klenow, Sergii Meleshchuk, Martha Denisse Pierola and Andres Rodriguez-Clare

American Economic Journal: Macroeconomics, 2023, vol. 15, issue 3, 320-54

Abstract: In benchmark trade models that feature a constant trade elasticity, bilateral exports vary entirely on the intensive margin (exports per firm) or entirely on the extensive margin (number of firms). Our empirical analysis documents that roughly one-half of this variation occurs along each margin, implying that the trade elasticity is not constant. We estimate a generalized Melitz model with a joint log-normal distribution for firm productivity, fixed costs, and demand shifters. Using exact-hat algebra, we quantify how trade costs affect trade flows and welfare. Welfare effects are similar to those in the Melitz-Pareto model, but implied trade flows differ significantly.

JEL-codes: D22 D24 D43 F12 F14 L13 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://www.aeaweb.org/doi/10.1257/mac.20200269 (application/pdf)
https://www.aeaweb.org/doi/10.1257/mac.20200269.appx (application/pdf)
https://www.aeaweb.org/doi/10.1257/mac.20200269.ds (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

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:aea:aejmac:v:15:y:2023:i:3:p:320-54

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

DOI: 10.1257/mac.20200269

Access Statistics for this article

American Economic Journal: Macroeconomics is currently edited by Simon Gilchrist

More articles in American Economic Journal: Macroeconomics from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().