Firms' Exporting Behavior under Quality Constraints

Juan Hallak and Jagadeesh Sivadasan

No 628, Working Papers from Research Seminar in International Economics, University of Michigan

Abstract: We develop a model of international trade with two dimensions of firm heterogeneity and export quality constraints that manifest as higher variable trade costs for lower quality fi rms. In addition to "productivity", firms are also heterogeneous in their "caliber" -- the ability to develop high-quality products with lower fixed outlays. The model predicts various conditional exporter premia. Conditional on size, exporters sell higher quality products, charge higher prices, pay higher input prices and higher wages, and use capital more intensively. Some of these predictions have already been documented in the empirical literature. However, although they are apparently an intuitive implication of single-attribute models, conditional exporter premia cannot be rationalized through these models as they imply no variation in export status once size is controlled for. We test these predictions using manufacturing establishment data for India, the U.S., Chile, and Colombia, and find strong support for the model. We also investigate the sources of export quality constraints using firm-level trade shipment data for the U.S. and India. Destination per-capita income plays a key role for fi rms in India. For fi rms in the U.S., both distance and destination per-capita income play a role, though the effect of per-capita income is about a third of its magnitude for India.

Keywords: productivity; caliber; xed costs; exports; rm heterogeneity (search for similar items in EconPapers)
JEL-codes: F10 F12 F14 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2011-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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http://www.fordschool.umich.edu/rsie/workingpapers/Papers626-650/r628.pdf

Related works:
Working Paper: Firms' Exporting Behavior under Quality Constraints (2010)
Working Paper: Firms' Exporting Behavior under Quality Constraints (2009)
Working Paper: Firms' Exporting Behavior under Quality Constraints (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:mie:wpaper:628

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