Andres Rodriguez-Clare, University of California, Berkeley
Presenter: Andres Rodriguez-Clare, University of California, Berkeley
Paper: The Intensive Margin in Trade
Abstract: The Melitz model highlights the importance of the extensive margin (the number of firms exporting) for trade flows. Using the World Bank’s Exporter Dynamics Database featuring firm-level exports from 50 countries, we find that around 50% of variation in exports does occur on the extensive margin — a quantitative victory for the Melitz framework. The remaining 50% on the intensive margin (exports per exporting firm) contradicts a special case of Melitz with Pareto-distributed firm productivity, which has become a tractable benchmark. This benchmark model predicts that, conditional on the fixed costs of exporting, all variation in exports across trading partners will occur on the extensive margin. Combining Melitz with lognormally-distributed firm productivity and firm-destination fixed trade costs can explain the intensive margin seen in the EDD data. In the EDD, the importance of the intensive margin rises steadily when going from the smallest to largest exporting firms across source countries, as is also predicted by the Melitz model with lognormally-distributed productivity.
The International Economics Seminar series is presented jointly with the Walsh School of Foreign Service and the Economics Department of Georgetown University.