Firms’ entry choices across export products and markets, and the consequences of trade in an open economy: Evidence from China

Peter Egger, Jie Li and Han Wu

Journal of Economic Behavior & Organization, 2023, vol. 209, issue C, 243-262

Abstract: We outline a model of endogenous choices of market entry and product scope in a partial-equilibrium model of heterogeneous firms with arbitrary productivity. Firms’ choices of interest depend on market characteristics including variable trade and fixed market-entry costs. Conditional on fixed costs, the extent to which firms respond to shocks depends on their (potentially nonparametric) density around the zero-profit threshold. Accordingly, identical changes in, e.g., variable trade costs per product and market can lead to vastly different responses across not only markets and products but also firms. We shed light on the heterogeneity of these responses by estimating parameters and otherwise calibrating the model to firm-and-product-level bilateral trade data for China.

Keywords: Trade; Extensive margins; China (search for similar items in EconPapers)
JEL-codes: D24 F14 L11 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:209:y:2023:i:c:p:243-262

DOI: 10.1016/j.jebo.2023.03.006

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