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Trade and Firm Dynamics

Paper Session

Friday, Jan. 4, 2019 2:30 PM - 4:30 PM

Atlanta Marriott Marquis, M101
Hosted By: American Economic Association
  • Chair: Nels Lind, Emory University

Exporting and Frictions in Input Markets: Evidence from Chinese Data

Maria Domenica Tito
Federal Reserve Board
Ruoying Wang
Vancouver School of Economics


This paper investigates the impact of international trade on input market distortions. We focus on a specific friction, binding borrowing constraints in capital markets. We propose a theoretical model where a firm's demand for capital is constrained by an initial asset allocation and past sales. While the initial distribution of assets induces misallocation if the asset endowment at more productive firms does not fully cover their demand for capital, the dependence of the borrowing constraint from past sales proxies for cross-firm differences in the cost of default--which is empirically higher at larger firms. Overtime, an increase in sales relaxes the borrowing constraint; similarly, shocks to market access, such as opening to trade, magnify the impact of sales on easing the financial constraints, thus accelerating the convergence towards the frictionless allocation. To analyze the empirical relationship between market access and credit frictions, we draw on the annual surveys conducted by the Chinese National Bureau of Statistics (NBS) for 1998-2007 and we construct firm-level measures of distortions. We disentangle firm heterogeneity from potential frictions in constructing the dispersion across average input products. We find smaller labor and capital dispersion across exporting firms; the dispersion is even smaller in sectors where firms face lower tariffs or are more dependent on external financing. Our empirical analysis also suggests that export shocks significantly reduce the dispersion across input returns over time, with the effect mostly occurring at constrained firms. Our findings point to within-sector input reallocation as an important channel for the realization of the gains from international trade.

How are Firms Organized? A Descriptive Analysis of Firm-Level Networks of Establishments

Jennifer P. Poole
American University
Catherine Laffineur
University of Cote d’Azur


The rapid development of communication technologies, the automation of production processes, and broad-scale globalization have made it possible for firms to accentuate the fragmentation of the value chain in order to benefit from the gains to specialization. Our work studies this important issue at the level of the establishment. As very little is known about the degree to which multi-plant firms concentrate activities across plants, the first step in this research agenda is a systematic set of descriptive statistics on the prevalence of plant-level specialization of occupational tasks. Our work relies on detailed matched employer-employee administrative data from France. Importantly, this data allows us to explore within-firm, across-plant, networks and the occupational structure of each plant in the network. We argue that organizational change, captured by the occupational specialization of establishments may be a critical component of changes in local labor demand. Therefore, in future iterations of this research agenda, we intend to explore the role of plant specialization on outcomes for workers.

Measuring the Input Rank in Global Production Networks

Armando Rungi
IMT Lucca
Loredana Fattorini
IMT Lucca


In this paper, we propose the Input Rank as a measure to study the organization of global supply networks made of buyers and suppliers. The Input Rank assesses the technological relevance of any direct or indirect input for any target output, assuming that a Markov process is started by a purchasing manager to navigate throughout its supply network and collect information on indirect transactions. Therefore, we compute our Input Rank on both the U.S. and the world input-output tables, providing some interesting descriptives on the eigenvector centrality of industries and countries in the organization of production networks. Finally, we adopt the Input Rank to test vertical integration choices made by 20,489 U.S. parent companies controlling 154,000 affiliates worldwide. Results show that a high Input Rank is positively associated to: i) a higher probability that an input is vertically integrated within a firm boundary; ii) a higher number of subsidiaries that are assigned to produce that input.

Bundling and Exporting: Evidence from German SMEs

Tommaso Aquilante
Bank of England
Ferran Vendrell-Herrero
University of Birmingham


This paper studies the effect of bundling products and services on firm exports
performance. Using a unique sample, we document several facts on German SMEs.
First, bundling is a relatively rare activity which is unevenly spread across sectors.
Second, SMEs that bundle products and services are more productive than those
selling only services or products. Third, these firms tend to be more internationally
oriented. While most of the existing literature focuses on large firms, we contribute
to it by uncovering a robust positive relationship between product-service bundling
and exporting also in SMEs. Interestingly, the competitiveness-enhancing effect of
bundling goes beyond manufactures, affecting non-manufacturing firms too. To
mitigate endogeneity concerns, we exploit the panel structure of the data and
implement several (doubly robust) propensity score matching techniques.

The Effects of Chinese Imports on Female Workers in the Brazilian Manufacturing Sector

Lourenco S. Paz
Baylor University
John Ssozi
Baylor University


The changes in the exposure to international competition experienced by the Brazilian economy in the 2000s may have impacted manufacturing workers differently according to their gender. Typically, female workers are mostly employed in the unskilled-labor intensive manufacturing industries. This study uses the increased openness of the Brazilian economy in the 2000s to assess the impacts of trade on its manufacturing female workers. During this period, Chinese imports increased considerably, and given the fact that China is unskilled-labor abundant relative to Brazil, many observers would expect that female workers would be disproportionately affected. Using Brazilian household data covering both formal and informal female workers, this study’s findings imply that Chinese import penetration fostered the female share of employment, whiles imports from the Rest of the World (ROW) had the opposite effect. More precisely, the Chinese import penetration had a stronger positive impact on the female share in unskilled-labor intensive industries, while the ROW import penetration had a negative effect. Both import penetrations reduced the likelihood of female workers having an informal job, and the magnitude of these effects depended on state and industry characteristics. Furthermore, the implementation of the Nova Matriz Economica policy in 2008 modulated these effects.
JEL Classifications
  • F2 - International Factor Movements and International Business