We present a North-South model of international trade in which differentiated products are developed in the North. Sectors are populated by final-good producers who differ in productivity levels. On the basis of productivity and sectoral characteristics, firms decide whether to integrate into the production of intermediate inputs or outsource them. In either case they have to decide from which country to source the inputs. Final-good producers and their suppliers must make relationship-specific investments, both in an integrated firm and in an arm’s-length relationship. We describe an equilibrium in which firms with different productivity levels choose different ownership structures and supplier locations. We then study the effects of withinsectoral heterogeneity and variations in industry characteristics on the relative prevalence of these organizational forms. I.

We look beneath bilateral trade data by examining the exports and imports of in French manufacturing firms. One striking finding is that variation in trade dividual across sources and destinations is much more the consequence of variation volumes the number of firms participating than in how much each one buys or sells. At the in time, the variation in trade volumes across firms is much more the consequence same variation in amounts sold to or bought from a given number of trading partners of of firms account for most trade. If they trade at all most firms export to or fraction from only one country, but most trade is accounted for by firms that export import

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. (JEL F11, F14, F40) The gravity equation relates bilateral trade volumes to distance and country size. Countless gravity equations have been estimated, usually with “good ” results, and trade theorists have proposed various theoretical explanations for gravity’s success. However, the many potential explanations for the success of the gravity equation make it a problematic tool for discriminating among trade models. 1 As a matter of arithmetic, the value of trade depends on the number of goods

In this paper we provide an analysis of the process of creative destruction across 24 countries and 2-digit industries over the past decade. We rely on a newly assembled dataset that draws from different micro data sources (business registers, census, or representative enterprise surveys). The novelty of our approach is in the harmonization of firm-level data across countries, which enables international comparisons and the identification of country-specific factors as opposed to sector and time effects. All countries display a massive reallocation of resources, with the entry and exit of many firms in all markets, the failure of many newcomers and the expansion of successful ones. This process of creative destruction affects productivity directly by reallocating resources toward more productive uses, but also indirectly through the effects of increased market contestability. There are also large differences across groups of countries. While entry and exit rates are fairly similar across industrial countries, post-entry performance differs markedly between Europe and the United States, a potential indication of the importance of barriers to firm growth as opposed to barriers to entry. Transition economies show an even more impressive process of creative destruction and, those that have progressed the most toward a market economy show better outcomes from this process. Finally, Mexico shows large firm dynamics with many new firms entering the battle but also many failing rapidly, while Argentina resembles Continental Europe with smaller flows and less impressive post-entry growth of successful firms.

This paper surveys the recent burgeoning literature that empirically examines the foreign direct investment (FDI) decisions of multinational enterprises (MNEs) and the resulting aggregate location of FDI across the world. The contribution of the paper is to evaluate what we can say with relative confidence about FDI as a profession, given the evidence, and what we cannot have much confidence in at this point. Suggestions are made for future research directions. (JEL F21, F23)

Investigations of the effect of quality differences on heterogeneous performance in exporting have been limited by lack of direct measures of quality. We examine exports of French wine, matching the exporting firms to producer ratings from two wine guidebooks. We show that high quality producers export to more markets, charge higher prices, and sell more in each market. Our model predicts quality sorting: the more difficult a market is to serve, the better on average will be the firms that serve it. Our findings point to the empirical importance of quality sorting in one industry and could be extended to other industries.

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This paper presents a model of international trade that features heterogeneous firms, relative endowment differences across countries, and consumer taste for variety. The paper demonstrates that firm reactions to trade liberalization generate endogenous Ricardian productivity responses at the industry level that magnify countries’ comparative advantage. Focusing on the wide range of firmlevel reactions to falling trade costs, the model also shows that, as trade costs fall, firms in comparative advantage industries are more likely to export, that relative firm size and the relative number of firms increases more in comparative advantage industries and that job turnover is higher in comparative advantage industries than in comparative disadvantage industries.

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Using a panel of 9292 UK manufacturing firms over the period 1993-2003, we explore the links between firms’ financial health and their export market participation decisions. We find that exporters exhibit better financial health than non-exporters. Yet, when we differentiate between continuous exporters and starters, we see that this result is driven by the former. Starters generally display low liquidity and high leverage, possibly due to the sunk costs which need to be met to enter export markets. Furthermore, we find no evidence that that firms enjoying better ex-ante financial health are more likely to start exporting, and strong evidence that participation in export markets improves firms ’ financial health.