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Showing results 1 to 9 of approximately 9.
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Working Paper
Do sunk costs of exporting matter for net export dynamics?
Not all firms export every period. Firms enter and exit foreign markets. Previous research has suggested that these export participation decisions have significant aggregate implications. In particular, it has been argued that these export decisions are important for the comovements of net exports and the real exchange rate. In this paper, the authors evaluate these predictions in a general equilibrium environment. Specifically, assuming that firms face an up-front, sunk cost of entering foreign markets and a smaller period-by-period continuation cost, they derive the discrete entry and exit ...
Working Paper
Do falling iceberg costs explain recent U.S. export growth?
We study empirically and theoretically the growth of U.S. manufacturing exports from 1987 to 2007. We identify the change in iceberg costs with plant-level data on the intensity of exporting by exporters. Given this change in iceberg costs, we find that a GE model with heterogeneous establishments and a sunk cost of starting to export is consistent with both aggregate U.S. export growth and the changes in the number and size of U.S. exporters. The model also captures the non-linear dynamics of U.S. export growth. A model without a sunk export cost generates substantially less trade growth and ...
Working Paper
Do falling iceberg costs explain recent U.S. export growth?
Superseded by Working Paper 12-20 ; The authors study the rise in U.S. manufacturing exports from 1987 to 2002 through the lens of a monopolistically competitive model with heterogeneous producers and sunk costs of exporting. Using the model, they infer that iceberg costs fell nearly 27 percent in this period. Given this change in iceberg costs, the authors use the model to calculate the predicted increase in trade. Contrary to the findings in Yi (2003), they find that the exports should have grown an additional 70 percent (78.7 vs. 46.4). The model overpredicts export growth partly because ...
Working Paper
Establishment heterogeneity, exporter dynamics, and the effects of trade liberalization
The authors study the effects of tariffs in a dynamic variation of the Melitz (2003) model, a monopolistically competitive model with heterogeneity in productivity across establishments and fixed costs of exporting. With fixed costs of starting to export that are on average 3.7 times as large as the costs incurred to continue as an exporter, the model can match both the size distribution of exporters and annual transition in and out of exporting among US manufacturing establishments. The authors find that the tariff equivalent of these fixed costs is nearly 30 percentage points. They use the ...
Working Paper
Microeconomic uncertainty, international trade, and aggregate fluctuations
The extent and direction of causation between micro volatility and business cycles are debated. We examine, empirically and theoretically, the source and effects of fluctuations in the dispersion of producer-level sales and production over the business cycle. On the theoretical side, we study the expect of exogenous first- and second-moment shocks to producer-level productivity in a two-country DSGE model with heterogeneous producers and an endogenous dynamic export participation decision. First-moment shocks cause endogenous fluctuations in producer-level dispersion by reallocating ...
Working Paper
Establishment heterogeneity, exporter dynamics, and the effects of trade liberalization
The authors study a variation of the Melitz (2003) model, a monopolistically competitive model with heterogeneity in productivity across establishments and fixed costs of exporting. They calibrate the model to match the employment size distribution of US manufacturing establishments. Export participation in the calibrated model is then compared to the data on US manufacturing exporters. With fixed costs of starting to export about 3.9 times as large as costs of continuing as an exporter, the model can match both the size distribution of exporters and transition into and out of exporting. The ...
Journal Article
Understanding exports from the plant up
Some companies export their products abroad, while others choose to sell only in their home market. Similarly, over time, some nonexporters become exporters and some exporters stop exporting. The decision to export is a big, important decision for an organization, one that takes time and resources but one that can lead to an expansion of sales and profits. Policymakers recognize that although exporting isn?t easy, it can boost sales and create jobs when successful. To help in this process, many states devote substantial resources to encouraging exports, including loans, trade missions, and ...
Working Paper
Trade adjustment dynamics and the welfare gains from trade
We build a micro-founded two-country dynamic general equilibrium model in which trade responds more to a cut in tariffs in the long run than in the short run. The model introduces a time element to the fixed-variable cost trade-off in a heterogeneous producer trade model. Thus, the dynamics of aggregate trade adjustment arise from producer-level decisions to invest in lowering their future variable export costs. The model is calibrated to match salient features of new exporter growth and provides a new estimate of the exporting technology. At the micro level, we find that new exporters ...
Working Paper
The role of two frictions in geographic price dispersion: when market friction meets nominal rigidity
This paper empirically investigates and theoretically derives the implications of two frictions, market friction and nominal rigidity, on the dynamic properties of intra-national relative prices, with an emphasis on the interaction of the two frictions. By analyzing a panel of retail prices of 45 products for 48 cities in the U.S., we make two major arguments. First, the effect of each type of friction on the dynamics of intercity price gaps is quite different. While market frictions arising from physical distance and transportation costs contribute significantly to volatile and persistent ...