Firm Level Heterogeneous Productivity and Demand Shocks: Evidence from Bangladesh

14 Pages Posted: 31 Dec 2007 Last revised: 14 Feb 2008

See all articles by Hiau Looi Kee

Hiau Looi Kee

World Bank - Development Research Group (DECRG)

Kala Krishna

Pennsylvania State University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: December 2007

Abstract

This paper looks at the predictions of a standard heterogeneous firm model regarding the exports of firms across markets in response to a particular trade policy "experiment" and compares these predictions to the data. A unique feature of our data is that it has information on the exports of the same firm to different markets which allows us to look for a new set of predictions of such models. We argue that while certain predictions seem consistent with the data, others are not. We then describe the patterns found in the data and argue that firm and market specific demand shocks help explain a number of these anomalies. These parsimoniously capture factors, like business contacts or networks, or even fashion shocks, that make buyers more attracted to one firm rather than another in a particular market.

Suggested Citation

Kee, Hiau Looi and Krishna, Kala, Firm Level Heterogeneous Productivity and Demand Shocks: Evidence from Bangladesh (December 2007). NBER Working Paper No. w13698, Available at SSRN: https://ssrn.com/abstract=1079278

Hiau Looi Kee

World Bank - Development Research Group (DECRG) ( email )

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Kala Krishna (Contact Author)

Pennsylvania State University - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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