Firms' Exporting Behavior under Quality Constraints

64 Pages Posted: 5 Aug 2009

See all articles by Juan Carlos Hallak

Juan Carlos Hallak

University of San Andres (UMSA) - Department of Economics; National Bureau of Economic Research (NBER)

Jagadeesh Sivadasan

University of Michigan, Stephen M. Ross School of Business; University of Michigan at Ann Arbor - Survey Research Center

Multiple version iconThere are 2 versions of this paper

Date Written: May 1, 2009

Abstract

We develop a model of international trade with export quality requirements and two dimensions of firm heterogeneity. In addition to "productivity", firms are also heterogeneous in their "caliber" - the ability to produce quality using fewer fixed inputs. Compared to single attribute models of firm heterogeneity emphasizing either productivity or the ability to produce quality, our model provides a more nuanced characterization of firms' exporting behavior. In particular, it explains the empirical fact that firm size is not monotonically related with export status: there are small firms that export and large firms that only operate in the domestic market. The model also delivers novel testable predictions. Conditional on size, exporters are predicted to sell products of higher quality and at higher prices, pay higher wages and use capital more intensively. These predictions, although apparently intuitive, cannot be derived from single-attribute models of firm heterogeneity as they imply no variation in export status after size is controlled for. We find strong support for the predictions of our model in manufacturing establishment datasets for India, the U.S., Chile, and Colombia.

Keywords: Productivity, quality, exports, firm heterogeneity

JEL Classification: F10, F12, F14

Suggested Citation

Hallak, Juan Carlos and Sivadasan, Jagadeesh, Firms' Exporting Behavior under Quality Constraints (May 1, 2009). US Census Bureau Center for Economic Studies Paper No. CES-WP-09-13, Available at SSRN: https://ssrn.com/abstract=1444548 or http://dx.doi.org/10.2139/ssrn.1444548

Juan Carlos Hallak (Contact Author)

University of San Andres (UMSA) - Department of Economics ( email )

Vito Dumas 284
B1644BID Victoria, Buenos Aires
Argentina

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Jagadeesh Sivadasan

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

University of Michigan at Ann Arbor - Survey Research Center ( email )

Ann Arbor, MI
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
54
Abstract Views
550
rank
307,299
PlumX Metrics