Determinants of trade margins: insights using state export data
Cletus Coughlin () and
Subhayu Bandyopadhyay ()
No 2014-6, Working Papers from Federal Reserve Bank of St. Louis
We adapt the heterogeneous firm trade models of Helpman, Melitz, and Rubinstein (2008) and Lawless (2010) to analyze extensive and intensive trade margins using state-level exports to foreign nations. Our theoretical analysis provides definitive predictions for the effects of changes in fixed costs, variable costs, and foreign income on the extensive margin, while for the intensive margin the predictions regarding changes in fixed costs are definitive, but the effects of changes in variable costs and foreign income are not. The number of exporting firms of a state is used to measure the extensive margin, while the intensive margin is approximated by the average firm exports of a state. Various count-data models, such as the standard negative binomial and its hurdle extension, are used to address non-trading pairs and overdispersion in the extensive trade estimations, while a Heckman correction is examined to handle sample selection issues in the intensive margin estimations. As the theory predicts, we find more consistent and statistically significant effects of changes in cost-related variables on the extensive than on the intensive margin of trade. Unlike Lawless (2010), but consistent with a truncated Pareto distribution, empirical findings suggest that variable costs reduce average exports. A noteworthy finding is that U.S. foreign direct investment has a positive effect on both margins.
Keywords: state exports; extensive margin; intensive margin; negative binomial (search for similar items in EconPapers)
JEL-codes: F10 R10 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int
Date: 2014-02-27, Revised 2015-11-18
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
http://research.stlouisfed.org/wp/2014/2014-006.pdf Full text (application/pdf)
Working Paper: Determinants of Trade Margins: Insights Using State Export Data (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:fip:fedlwp:2014-006
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in Working Papers from Federal Reserve Bank of St. Louis Contact information at EDIRC.
Bibliographic data for series maintained by Anna Oates ().