Zeros, Quality and Space: Trade Theory and Trade Evidence

By Richard E. Baldwin, J. Harrigan. 2007

970 citations recorded by the source corpus.

Bilateral, product-level data exhibit a number of strong patterns that can be used to evaluate international trade theories, notably the spatial incidence of "export zeros" (correlated with distance and importer size), and of export unit values (positively related to distance). We show that leading theoretical trade models fail to explain at least some of these facts, and propose a variant of the Melitz model that can account for all the facts. In our model, high quality firms are the most competitive, with heterogeneous quality increasing with firms' heterogeneous cost.

Subfields: Economics and Econometrics, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/789a04584248bf0e71044d666dd50de776123bdd

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Citations in the corpus

Market structure and exchange rate pass-through (2012, background): “Indeed, Berman et al. (2012) find that pass-through varies substantially according to firm size.”
Gravity Equations: Workhorse,Toolkit, and Cookbook (2013, neutral): “(2007, 2008) or Caliendo and Parro (2012) use the heterogenous industries version, Bergstrand et al. (2013) and Egger et al. (2011) use the CES-MC view, but all those GETI-related exercises rely on structural gravity, and hence need it to hold empirically.”
Trade facilitation and the extensive margin (2013, background): “…(2007), Brenton and Newfarmer (2007), Evenett and Venables (2002), Flam and Nordström (2006), Baldwin and Di Nino (2006), Amurgo-Pacheco and Piérola (2008), Debaere and Mostashari (2005), Baldwin and Harrigan (2007), Hummels and Klenow (2005), Funke and Ruhwedel (2001) and Kehoe and Ruhl (2003).”
Trade Liberalization and Embedded Institutional Reform: Evidence from Chinese Exporters (2013, background): “, high-productivity) rms.(6) The corresponding expresssion for export quantity is”
Trade and Prices with Heterogeneous Firms (2008, background): “Most closely related to this paper, Baldwin and Harrigan (2007) explore how information contained in the incidence of export zeros and export prices in U.S. bilateral data helps distinguish between alternative models of international trade, including Helpman-Krugman, Eaton-Kortum, and Melitz style t”
Theories of Heterogeneous Firms and Trade (2011, neutral): “(8) 6An empirical literature has sought to use variation in unit values (revenue divided by physical quantity) to distinguish between models of horizontal product differentiation featuring productivity and quality differences across firms, including Baldwin & Harrigan (2007) and Johnson (2009).”
Multi-Product Firms and Product Quality (2017, neutral): “(4) Note that if = 1, the model would reduce to the original BRS framework in which rms (rm-products) with lower marginal costs o¤er lower prices and earn higher revenues and prots.”
Heterogeneous Firms, Quality, and Trade☆ (2015, neutral): “i2 (q i zi) di 1 2 (8)<: Z i2 q i 1 2 zi di (9)=; 2 (1)”
Not So Demanding: Demand Structure and Firm Behavior (2017, neutral): “This implies that quality affects demand x only through the quality-adjusted price p/q. Baldwin and Harrigan (2011) call this assumption “box-size quality”: the consumer’s willingness to pay for a single box of a good with quality level q is the same as their willingness to pay for q boxes of the…”
Firms' Exporting Behavior under Quality Constraints (2009, neutral): “Equation (9) shows that λ/c can be expressed as a monotonic function of η.”
What Explains the Low Survival Rate of Developing Country Export Flows? (2009, result): “Moreover, a decrease in the exporter’s exchange rate during the lifetime of the trade flow implies that the importer’s purchasing power in the exporter’s Finally, we confirm the results of previous studies such as Blyde (2008) and Baldwin and Harrigan (2007) in finding that the economic size of both”