Do Trade Policy Differences Induce Sorting? Theory and Evidence from Bangladeshi Apparel Exporters
62 Pages Posted: 21 Nov 2006
Date Written: November 2006
This paper provides new testable predictions of heterogeneous firm (HF) models for trade. Variations in trade policy, trade preferences, and the rules of origin (ROOs) needed to obtain them are incorporated into the model and some analytical means of dealing with the resulting asymmetries are developed. The policy differences modelled correspond to differences across products and destination markets for Bangladeshi garment exports to the US and EU. These turn out to provide an interesting natural experiment. Predictions of the model for the distribitions of TFP of various groups of firms are tested non-parametrically and are supported by the data.
Keywords: Rules of origin, firm heterogeneity, export performance and productivity
JEL Classification: F12, F13
Suggested Citation: Suggested Citation