Firms' Exporting Behavior under Quality Constraints

Juan Hallak and Jagadeesh Sivadasan

Working Papers from U.S. Census Bureau, Center for Economic Studies

Abstract: We develop a model of international trade with export quality requirements and two dimensions of firm heterogeneity. In addition to "productivity", firms are also heterogeneous in their "caliber" {the ability to produce quality using fewer fixed inputs. Compared to singleattribute models of firm heterogeneity emphasizing either productivity or the ability to produce quality, our model provides a more nuanced characterization of firms' exporting behavior. In particular, it explains the empirical fact that firm size is not monotonically related with export status: there are small firms that export and large firms that only operate in the domestic market. The model also delivers novel testable predictions. Conditional on size, exporters are predicted to sell products of higher quality and at higher prices, pay higher wages and use capital more intensively. These predictions, although apparently intuitive, cannot be derived from singleattribute models of firm heterogeneity as they imply no variation in export status after size is controlled for. We find strong support for the predictions of our model in manufacturing establishment datasets for India, the U.S., Chile, and Colombia.

Keywords: Productivity; quality; exports; firm heterogeneity (search for similar items in EconPapers)
JEL-codes: F10 F12 F14 (search for similar items in EconPapers)
Pages: 64 pages
Date: 2009-05
New Economics Papers: this item is included in nep-cwa, nep-eff and nep-int
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Citations: View citations in EconPapers (55)

Downloads: (external link)
https://www2.census.gov/ces/wp/2009/CES-WP-09-13.pdf First version, 2009 (application/pdf)

Related works:
Working Paper: Firms' Exporting Behavior under Quality Constraints (2011)
Working Paper: Firms' Exporting Behavior under Quality Constraints (2010)
Working Paper: Firms' Exporting Behavior under Quality Constraints (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:cen:wpaper:09-13

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