Heterogeneous Firms and International Trade: The Role of Productivity and Financial Fragility

Tiziana Assenza, Domenico Delli Gatti, Jakob Grazzini and Giorgio Ricchiuti

No 5959, CESifo Working Paper Series from CESifo

Abstract: Starting from the premise that productivity is heterogeneous across firms, Melitz (2003) explains why individual productivity is key in determining the capability of a firm to export. In this paper we build a model along Melitz’s lines to show that also financial capacity, captured by the level of individual net worth, affects the behaviour of firms on international markets. We show that firms with low productivity may still be able to penetrate foreign markets provided they have enough net worth to incur the cost of exporting. In this setting, we explore the effects of changes in transport costs, fixed costs for exporters and of financial constraints.

Keywords: productivity; net worth; international trade; heterogeneous firms (search for similar items in EconPapers)
JEL-codes: E44 F12 F14 F21 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

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Working Paper: Heterogeneous Firms and International Trade: The role of productivity and financial fragility (2016)
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