Firm heterogeneity and international trade: A cross-country analysis within the EU

Claire Giordano and Paloma Lopez-Garcia

The Journal of International Trade & Economic Development, 2021, vol. 30, issue 1, 68-103

Abstract: By exploiting cross-country micro-aggregated CompNet data, this study investigates the main implications of firm heterogeneity for international trade of EU countries, distinguishing between old and new Member States. On the one hand, exporting firms are larger, more productive and pay higher wages than non-exporting firms, especially in new EU economies. Only the former firms are indeed able to bear export costs, which are higher in new EU countries and are related to various factors, such as the quality of the legal system, the restrictiveness of labour-market regulation and the degree of access to finance. Hence, only few enterprises actually export, and the intensity of aggregate export concentration within few firms varies across countries and sectors. On the other hand, opening to trade boosts individual firms’ productivity, via a number of channels (including GVC integration, which is particularly important for new EU countries), and also enhances allocative efficiency across firms, in turn increasing aggregate productivity growth. One of the main standard determinants of export growth, namely changes in the real effective exchange rate, impacts aggregate performance differently across countries and sectors, depending on sectoral composition and on firm characteristics, in both old and new Member States.

Date: 2021
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Working Paper: Firm heterogeneity and trade in EU countries: a cross-country analysis (2019)
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DOI: 10.1080/09638199.2020.1788123

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