Firm Heterogeneity and Costly Trade: A New Estimation Strategy and Policy Experiments
Svetlana Demidova (),
Kala Krishna (),
Hiau Looi Kee () and
Additional contact information
Ivan Cherkashin: Department of Economics, Pennsylvania State University
No 1199, 2009 Meeting Papers from Society for Economic Dynamics
In previous work (Kee and Krishna (2008), "Firm Level Heterogeneous Productivity and Demand Shocks: Evidence from Bangladesh," American Economic Review, 98(2)) we argued that two dimensions of firm heterogeneity (firm specific productivity and firm and market specific demand shocks) were needed to explain the facts. In this paper we do three things. 1. We develop a partial equilibrium model of the Bangladeshi Apparel sector exporting one product group to two markets that incorporates these two dimensions of heterogeneity. 2. We show how to use this model together with information on the distributions of productivity and demand shocks (which we obtain from prior work, see Demidova, Kee and Krishna (2008), "Do Trade Policy Differences Induce Sorting? Theory and Evidence from Bangladeshi Apparel Exporters'') to estimate the model. 3. We use the model to perform counterfactual experiments about the effect of liberal trade preferences (accompanied possibly by distortion Rules of Origin) in one country. The contribution of the work is threefold. First, it simplifies the multi-country general equilibrium heterogeneous firm model to one that can be useful empirically. Second, our estimation procedure identifies fixed costs of entry, exports and production as well as documentation costs associated with meeting Rules of Origin. Such costs in prior work have been hard to estimate. Entry costs have been estimated in dynamic models using panel data from the pattern of firm entry/exit decisions. Our approach provides another way to estimate such costs from cross sectional data using differences in trade policy across destinations to do so. Third, our model can be simulated to provide estimates of the outcomes of alternative trade scenarios.
References: Add references at CitEc
Citations: Track citations by RSS feed
There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.
Journal Article: Firm heterogeneity and costly trade: A new estimation strategy and policy experiments (2015)
Working Paper: Firm heterogeneity and costly trade: a new estimation strategy and policy experiments (2015)
Working Paper: Firm Heterogeneity and Costly Trade: A New Estimation Strategy and Policy Experiments (2010)
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:red:sed009:1199
Access Statistics for this paper
More papers in 2009 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().