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Technological Progress, Exit and Trade

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The dynamics of export market exit and firm closure have found limited attention in heterogeneous-firms trade models. Accordingly, several of the predictions on exit stemming from new-new trade theory are at odds with the stylized facts. Empirically, higher productivity firms survive longer, higher productivity exporters are more likely to continue to export, and market exit is typically preceded by periods of contracting market shares. We show that the simple inclusion of exogenous economy wide technological progress into the standard Melitz (2003) model generates a tractable dynamic framework that generates endogenous exit decisions in line with the stylized facts.
Original languageEnglish
Publication year2010
Publication statusPublished - 2010
Event25th Annual Congress of the European Economic Association - Glasgow, United Kingdom
Duration: 23 Aug 201026 Aug 2010


Conference25th Annual Congress of the European Economic Association
CountryUnited Kingdom

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