The B.E. Journal of Economic Analysis & Policy
Editor-in-Chief: Jürges, Hendrik / Ludwig, Sandra
Ed. by Auriol , Emmanuelle / Brunner, Johann / Fleck, Robert / Mendola, Mariapia / Requate, Till / Zulehner, Christine / Schirle, Tammy
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Trade Liberalization and New Exporters' Size: A Test of Heterogeneous Firm Models
1Graduate Institute of International Studies, (email)
2Graduate Institute of International Studies, (email)
3Graduate Institute of International Studies, (email)
Citation Information: The B.E. Journal of Economic Analysis & Policy. Volume 8, Issue 1, ISSN (Online) 1935-1682, DOI: 10.2202/1935-1682.1735, May 2008
- Published Online:
This paper tests an empirical implication of heterogeneous firm models along the lines of Melitz (2003) in the context of falling trade costs. Using the EU's intensive liberalization phase (1993-2002) as a natural experiment, we investigate freer trade's impact on the frequency of market reorientation across the productivity distribution of active firms to shed light on the presence of a minimum productivity (size) threshold for profitable sales abroad. Contrary to the models' predictions, firms that switch from non-exporting to exporting over the studied period are not concentrated in a particular size range. Our findings, based on a rich data set of French manufacturing enterprises, suggest a scope for fine-tuning of the theoretical framework.
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