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The Economic Research Institute, Stockholm School of Economics SSE/EFI Working Paper Series in Economics and Finance

No 727:
Learning How to Export

Paul Segerstrom () and Ignat Stepanok ()

Abstract: In this paper, we present a standard quality ladders endogenous growth model with one significant new assumption, that it takes time for firms to learn how to export. We show that this model without Melitz-type assumptions can account for all the evidence that the Melitz (2003) model was designed to explain plus much evidence that the Melitz model can not account for. In particular, consistent with the empirical evidence, we find that trade liberalization leads to a higher exit rate of firms, that exporters charge higher prices for their products as well as higher markups, and that many large firms do not export.

Keywords: trade liberalization; heterogenous firms; quality ladders; endogenous growth; (follow links to similar papers)

JEL-Codes: F12; F13; F43; O31; O41; (follow links to similar papers)

37 pages, April 12, 2010, Revised September 16, 2013

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