Abstract
Empirical literature has established a positive link between
firm productivity and export status, yet notable exceptions exist.
The present paper shows that the underlying theory (Melitz,
2003) is in fact able to accommodate the rule as well as the
exception. The fulcrum of the argument is the tension between
empirical work measuring productivity based on average cost
information, and theoretical work representing productivity by
marginal cost. In a heterogeneous firms trade model, we compute
productivity based on average cost and find that around the
export-indifferent firm, exporters will be less productive than
non-exporters. Furthermore, we show that this effect may feed
through at the industry level.
firm productivity and export status, yet notable exceptions exist.
The present paper shows that the underlying theory (Melitz,
2003) is in fact able to accommodate the rule as well as the
exception. The fulcrum of the argument is the tension between
empirical work measuring productivity based on average cost
information, and theoretical work representing productivity by
marginal cost. In a heterogeneous firms trade model, we compute
productivity based on average cost and find that around the
export-indifferent firm, exporters will be less productive than
non-exporters. Furthermore, we show that this effect may feed
through at the industry level.
| Original language | English |
|---|---|
| Place of publication | Aarhus |
| Publisher | Aarhus Universitetsforlag |
| Publication status | Published - 2009 |
Keywords
- Intra-industry trade, firm productivity, monopolistic competition, heterogeneous firms