Firm Exit, Technological Progress and Trade

Philipp Schröder and Allan Sørensen

Economics Working Papers from Department of Economics and Business Economics, Aarhus University

Abstract: The dynamics of export market exit and firm closure have found limited attention in the new heterogeneous-firms trade literature. In fact, several of the predictions on firm survival and exit stemming from this new class of models are at odds with the stylized facts. Empirically, higher productivity firms survive longer, most firm closures are young firms, higher productivity exporters are more likely to continue to export compared to less productive exporters and market exits as well as firm closures are typically preceded by periods of contracting market shares. The present paper shows that the simple inclusion of exogenous economy wide technological progress into the standard Melitz (2003) model generates a tractable dynamic framework that generates endogenous exit decisions of firms in line with the stylized facts. Furthermore, we derive the effects of faster technological progress and trade liberalization on export market exit and firm closure.

Keywords: Intra-industry trade; entry/exit; monopolistic competition; heterogeneous firms; technological change (search for similar items in EconPapers)
JEL-codes: F12 F15 L11 L16 O33 (search for similar items in EconPapers)
Pages: 31
Date: 2011-12-20
New Economics Papers: this item is included in nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://repec.econ.au.dk/repec/afn/wp/11/wp11_17.pdf (application/pdf)

Related works:
Journal Article: Firm exit, technological progress and trade (2012)
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:aah:aarhec:2011-17

Access Statistics for this paper

More papers in Economics Working Papers from Department of Economics and Business Economics, Aarhus University
Bibliographic data for series maintained by ().