Essays on firm choice and international trade.

Abstract

This dissertation is composed of three essays that analyze the firm choice of how to service foreign destinations and which destinations to serve. In the first essay I provide a detailed decomposition of export growth at both the firm and product level. I first look at the export characteristics of Russian firm and the relationship between export growth margins and destination country characteristics. I then decompose product level export growth, focusing primarily on newly exported products, products withdrawn from the export market, and continuously exported products exported to new destinations. I show that there is a tendency for richer, larger countries to experience less growth on each of these margins than poorer, smaller countries and then discuss a model that accounts for these facts. Additionally, I show that even though many products are withdrawn from one or more destinations, very little export value is lost. I propose models which are consistent with the findings in the data.In the second essay, I show evidence that the geographic expansion of firm exports occurs slowly over time and that a large share of growth is due to continuing exporters entering new destinations. I also show that aggregated trade data can underestimate this value and hide the differing composition of export destinations among exporter types. New exporters enter large countries and destinations with characteristics similar to their domestic market. Less similar, distant or less developed countries are entered by firms already exporting to other destinations. I formulate a dynamic general equilibrium model to test if these patterns are due to firms learning how to export (as other recent empirical findings have suggested), or exogenous factors such as productivity growth. In this model, heterogeneous firms experience learning in the form of market entry costs that depend on export history. When calibrated to Russian firm level data, I find that learning plays a significant role in explaining the observed entry patterns, which standard trade models cannot account for. Additionally, by taking learning into account and targeting particular export destinations, governments can better assess the impact of liberalizations. Finally, in the third essay co-authored with Miguel F. Ricaurte, we use industry level data to show the striking differences among sectors in the ratios of exports to FDI sales. We determine what is needed to endogenously generate this pattern of export and FDI sales when firms make the decision to service a foreign market through either exports or foreign affiliates. By calibrating a model of monopolistically competitive firms, we find that tradability of goods is not enough to capture the observed sectoral differences, as is commonly assumed. We explore variants of the model and show that sector-specific taxes on multinationals and home bias allow us to replicate these differences.