TEMPORARY TRADE AND HETEROGENEOUS FIRMS

Sunday 28 August 2011, 10:45 - 13:30

Quick Links:   Programme Overview  •  Contributed Session 6  •  International Trade and Firm Heterogeneity II

Session: International Trade and Firm Heterogeneity II
Category: European Economic Association
Chaired By: Yoichi Sugita, Stockholm School of Economics
When & Where: Sunday 28 August 2011, 10:45 - 13:30, 20 Helga Eng, room 231
Presented By: Balazs Murakozy, IE-HAS
Co-Author(s): Gabor Bekes, IE-HAS

Using Hungarian firm-level export data, we show that about one third of firm-destination and about one half of firm-product-destination export spells are short-lived, or temporary, in each year. This is inconsistent with theories where comparative advantage is stable and market entry costs are sunk. We show how endogenous choice between variable and sunk cost trade technologies can explain the empirical importance and some characteristics of temporary trade. The predictions of our model are borne out by the data; the likelihood of temporary trade rises with lower productivity, further location and larger GDP of destination countries.

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