Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 0727: Learning How to Export

Paul Segerstrom () and Ignat Stepanok ()
Additional contact information
Paul Segerstrom: Dept. of Economics, Stockholm School of Economics, Postal: Stockholm School of Economics, Box 6501, SE-113 83 Stockholm, Sweden
Ignat Stepanok: Kiel Institute for the World Economy, Postal: Hindenburgufer 66, D-24105 Kiel, Germany

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

JEL-codes: F12; F13; F43; O31; O41

37 pages, First version: April 12, 2010. Revised: September 16, 2013. Earlier revisions: December 14, 2010, December 14, 2010, November 1, 2011, November 1, 2011.

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