Category Archives: Firms

Why might you want oligopolistic models of trade?

Why might you want oligopolstic models of trade?
“In 2004 Nokia’s share of Finnish GDP was 3.5 per cent and in 2003 it accounted for almost a quarter of Finland’s exports” (Neary, 2010).

“In 2004 Nokia’s share of Finnish GDP was 3.5 per cent and in 2003 it accounted for almost a quarter of Finland’s exports” (Neary, 2010).

De Loecker: “Detecting Learning by Exporting”

This abstract caught my eye:

Learning by exporting refers to the mechanism whereby firms improve their performance (productivity) after entering export markets. Although this mech- anism is often mentioned in policy documents, a significant share of econometric studies has not found evidence for this hypothesis. This has lead to a view that the correlation between firm-level export status and productivity is a result of a self-selection process of more productive firms becoming exporters. This paper shows that the methods used to come to the latter conclusion suffer from a large internal inconsistency: they rely on an exogenous evolving productivity process. I show how recent proxy estimators can easily be accommodated to incorporate the endogenous process of learning by exporting and can detect sig- nificant productivity gains upon export entry. I apply my empirical model to plant-level data and find substantial additional productivity gains (upon export entry) ranging from 4 to 27 percent.

“The Role of Intermediaries in Facilitating Trade”

JaeBin Ahn, Amit Khandelwal & Shang-Jin Wei:

We provide systematic evidence that intermediaries play an important role in facilitating trade using a firm-level the census of China’s exports. Intermediaries account for around 20% of China’s exports in 2005. This implies that many firms engage in trade without directly exporting products. We modify a heterogeneous firm model so that firms endogenously select their mode of export – either directly or indirectly through an intermediary. The model predicts that intermediaries will be relatively more important in markets that are more difficult to penetrate. We provide empirical confirmation for this prediction, and generate new facts regarding the activity of intermediaries.

NBER WP 15706.

Exporting raises productivity in sub-Saharan African manufacturing firms

Now here’s something you don’t see every day – evidence that exporting raises firm-level productivity. The conventional evidence says that exporters are more productive because of selection effects rather than learning-by-exporting (Clerides, Lach, and Tybout, QJE, 1998). But things may be different in Africa:

Proponents of trade liberalization argue that exporting helps firms to achieve higher productivity levels. This hypothesis is examined for a panel of manufacturing firms in nine African countries. The results indicate that exporters in these countries are more productive and, more importantly, exporters increase their productivity advantage after entry into the export market. While the first finding can be explained by selection–only the most productive firms engage in exporting–the latter cannot. The results are robust when unobserved productivity differences and self-selection into the export market are controlled for using different econometric methods. Scale economies are shown to be an important channel for the productivity advance. Credit constraints and contract enforcement problems prevent firms that only produce for the domestic market from fully exploiting scale economies.

Johannes Van Biesebroeck (2005), “Exporting raises productivity in sub-Saharan African manufacturing firms,” Journal of International Economics, 62(2): 373-391.