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Do trade policy differences induce sorting? Theory and evidence from Bangladeshi apparel exporters

Svetlana Demidova (), Hiau Looi Kee () and Kala Krishna ()

Journal of International Economics, 2012, vol. 87, issue 2, 247-261

Abstract: This paper provides a new heterogeneous firm model for trade where firms differ in their productivity and experience different market demand shocks. The model incorporates the variations in trade policy, trade preferences, and the rules of origin needed to obtain them that are faced by Bangladeshi garment exporters to the US and EU. We estimate firm's productivity using an extension of the Olley Pakes procedure that accounts for the biases arising from both demand shocks and productivity being unobserved. Predictions of the model are then tested non-parametrically and are shown to be supported empirically.

Keywords: Rules of origin; Firm heterogeneity; Demand shocks (search for similar items in EconPapers)
JEL-codes: F12 F13 (search for similar items in EconPapers)
Date: 2012
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Working Paper: Do Trade Policy Differences Induce Sorting? Theory and Evidence from Bangladeshi Apparel Exporters (2006) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:87:y:2012:i:2:p:247-261

DOI: 10.1016/j.jinteco.2011.12.008

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