Firm Dynamics and Trade / George A. Alessandria, Costas Arkolakis, Kim J. Ruhl.

Format:

Book

Author/Creator:

Alessandria, George A.

Contributor:

National Bureau of Economic Research.

Arkolakis, Costas.

Ruhl, Kim J.

Series:

Working Paper Series (National Bureau of Economic Research) no. w27934.

NBER working paper series no. w27934

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2020.

Summary:

We review the literature that studies the dynamics of firms in foreign markets, both at the intensive and extensive margins, and their aggregate implications. We first summarize a set of micro facts on exporter entry, expansion, contraction, and exit and macro facts about the response of aggregate trade flows to trade-policy and business-cycle shocks. We then present the canonical model developed in the literature to account for these facts and discuss its connection to the empirical evidence. We show how three model features -- future uncertain profits, an investment in market access, and high depreciation of that access upon exit -- generate transition dynamics and long-run aggregate outcomes from a cut in tariffs. The model and its extensions contribute to our understanding of the dynamics of trade integration and the evolution of future trade barriers. We discuss the key challenges faced by the canonical model, possible extensions, and applications of the framework to recent global events.

Notes:

Print version record

October 2020.