Firms in International Trade

71 Pages·2010·2.63 MB·English

by  Pol Antras

Firms in International Trade
(with an Application to Spain)
Pol Antràs Puchal (Harvard University)
Rubén Segura-Cayuela (Banco de España)
with
DDiieeggoo RRooddrríígguueezz RRooddrríígguueezz ((UU. CCoommpplluutteennssee))
December 2010 SERIES Invited Lecture 1
OOverviiew off RRecent
DDeevveellooppmmeennttss
2
Neoclassical Trade Theory
Firms are treated as a black box (supply side =

production set)
OOfftten assume consttantt retturns tto scalle, so ffiirm siize iis

indeterminate
GGeenneerraall eeqquuiilliibbrriiuumm oonnllyy ppiinnss ddoowwnn tthhee ssiizzee ooff tthhee

sector or industry to which the firm belongs
VVeerryy ppoowweerrffuull tthheeoorryy,, bbuutt ooff lliimmiitteedd uussee wwhheenn ssttuuddyyiinngg

firm-level issues in international trade
December 2010 SERIES Invited Lecture 3
New Trade Theory
Introduced increasing returns, imperfect competition

and product differentiation
TThhiis hhellpedd resollve thhe iinddetermiinacy off ffiirm siize

With product differentiation, firms face downward sloping

ddeemmaanndd ccuurrvveess aanndd tthheerree eexxiissttss aann ooppttiimmaall ffiirrmm ssiizzee
Free entry (and general equilibrium) then pins down

iinndduussttrryy ssiizzee aanndd aallssoo tthhee nnuummbbeerr ooff ffiirrmmss wwiitthhiinn aann
industry
New Trade Theoryy rationalized two-wayy trade flows in

similar products across countries
December 2010 SERIES Invited Lecture 4
Some Problematic Predictions
As insightful as New Trade Theory is, it delivers

some counterfactual predictions
BBecause allll ffiirms wiithhiin a sector are treatedd

symmetrically, either all firms within an industry
eexxppoorrtt oorr nnoonnee ddooeess ((aanndd tthheeyy aallwwaayyss ddoo wwiitthh CCEESS))
Trade liberalization generally affects all firms within

aann iinndduussttrryy ssyymmmmeettrriiccaallllyy ((aanndd wwhheenn iitt ddooeessnn’tt,
there is no way to predict these asymmetries)
TThheessee pprreeddiiccttiioonnss aarree pprroobblleemmaattiicc bbeeccaauussee tthheeyy ddoo

not provide a good description of reality
December 2010 SERIES Invited Lecture 5
“Evidence”
“There is no good reason to believe that the

assumptions of the Dixit-Stiglitz model – a
ccoonnttiinnuuuumm ooff ggooooddss tthhaatt eenntteerr ssyymmmmeettrriiccaallllyy iinnttoo
demand, with the same cost functions, and with the
eellaassttiicciittyy ooff ssuubbssttiittuuttiioonn bbeettwweeeenn aannyy ttwwoo ggooooddss bbootthh
constant and the same for any pair you choose – are
remotely true in reality.”
December 2010 SERIES Invited Lecture 6
“Evidence”
“There is no good reason to believe that the

assumptions of the Dixit-Stiglitz model – a
ccoonnttiinnuuuumm ooff ggooooddss tthhaatt eenntteerr ssyymmmmeettrriiccaallllyy iinnttoo
demand, with the same cost functions, and with the
eellaassttiicciittyy ooff ssuubbssttiittuuttiioonn bbeettwweeeenn aannyy ttwwoo ggooooddss bbootthh
constant and the same for any pair you choose – are
remotely true in reality.”
Paul Kruggman, Nobel Lecture 2008

December 2010 SERIES Invited Lecture 7
Real Evidence: Heterogeneity in Data
Standard deviation of log sales

Productivity: Standard deviation of log value added

per worker for U.S. plants:
Overall: 0.75

Within 4-digit sectors (450 sectors): 0.66

December 2010 SERIES Invited Lecture 8
Exporters are in the Minority
December 2010 SERIES Invited Lecture 9
Exporters in the U.S. (4-digit)
December 2010 SERIES Invited Lecture 10