Department of Economics and Business Economics

Import-push or Export-pull? An Industry-level Analysis of the Impact of Trade on Firm Exit

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Does the selection effect of trade work solely through competition from imports, or does the export market further contribute to firm selection? This paper provides a re-interpretation of the different mechanisms in terms of selection on profitability - rather than productivity - and derives novel predictions regarding the export market and the role of product differentiation. Empirical results for a sample of Danish manufacturing industries confirm the import- "push" hypothesis as well as the export- "pull" hypothesis, but also reveal differences across industries. The selection effect of trade is mainly driven by the "import-push" if product differentiation is high, whereas it is driven by the "export-pull" if goods are homogeneous.
Original languageEnglish
Pages (from-to)747-775
Number of pages29
Publication statusPublished - 2014

    Research areas

  • Firm exit, Exports, Import competition, Heterogeneous firms

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