TY  - JOUR
AU  - Hanson,Gordon H.
AU  - Xiang,Chong
TI  - Testing the Melitz Model of Trade:  An Application to U.S. Motion Picture Exports
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14461
PY  - 2008
Y2  - October 2008
UR  - http://www.nber.org/papers/w14461
L1  - http://www.nber.org/papers/w14461.pdf
N1  - Author contact info:
Gordon H. Hanson
IR/PS 0519
University of California, San Diego
9500 Gilman Drive
La Jolla, CA  92093-0519
Tel: 858/822-5087
Fax: 858/534-3939
E-Mail: gohanson@ucsd.edu

Chong Xiang
Department of Economics
Purdue University
403 West State Street
West Lafayette, IN 47907-2506
Tel: 765/494-4499
Fax: 765/496-1778
E-Mail: cxiang@purdue.edu
AB  - In this paper, we develop a simple empirical method to test two alternative versions of the Melitz (2003) model, one with global fixed export costs and one with bilateral fixed export costs.  With global costs, import sales per product variety (relative to domestic sales per variety) are decreasing in variable trade barriers, as a result of adjustment occurring along the intensive margin of trade.  With bilateral costs, imports per product variety are increasing in fixed trade costs, due to adjustment occurring along the extensive margin.  We apply our approach to data on imports of U.S. motion pictures in 46 countries over 1995-2006.  Imports per product variety are decreasing in geographic distance, linguistic distance, and other measures of trade costs, consistent with adjustment to these costs occurring along the intensive margin.  There is relatively little variation in the number of U.S. movies that countries import but wide variation in the box-office revenues per movie.  The data thus appear to reject the bilateral-fixed-export-cost model in favor of the global-fixed-export-cost model.
ER  -