TY  - JOUR
AU  - Cherkashin,Ivan
AU  - Demidova,Svetlana
AU  - Kee,Hiau Looi
AU  - Krishna,Kala
TI  - Firm Heterogeneity and Costly Trade: A New Estimation Strategy and Policy Experiments
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 16557
PY  - 2010
Y2  - November 2010
UR  - http://www.nber.org/papers/w16557
L1  - http://www.nber.org/papers/w16557.pdf
N1  - Author contact info:
Ivan Cherkashin
Research School of Economics
College of Business & Economics
Australian National University
H W Arndt building, Room 1008
Canberra, ACT 0200 Australia
E-Mail: ivan.cherkashin@anu.edu.au

Svetlana Demidova
Department of Economics
McMaster University
Canada
E-Mail: demidov@mcmaster.ca

Hiau Looi Kee
The World Bank
Development Research Group - Trade
1818 H Street, NW (MSN MC3-303)
Washington, DC 20433
E-Mail: hlkee@worldbank.org

Kala Krishna
Department of Economics
523 Kern Graduate Building
The Pennsylvania State University
University Park, PA 16802
Tel: 814/865-1106
Fax: 814/863-4775
E-Mail: kmk4@psu.edu
AB  - This paper builds a tractable partial equilibrium model in the spirit of Melitz (2003), which incorporates two dimensions of heterogeneity: firms specific productivity shocks and firm-market specific demand shocks. The structural parameters of interest are estimated using only cross-sectional data, and counterfactual experiments regarding the effects of reducing costs, both fixed and marginal, or of trade preferences (with distortionary Rules of Origin) offered by an importing country are performed. Our counterfactuals make a case for "trade as aid" as such policies can create a “"win-win-win" scenario and are less subject to the usual worries regarding the efficacy of direct foreign aid. They also suggest that reducing fixed costs at various levels can be quite effective as export promotion devices, with the exports induced per dollar spent ranging from .4 to 25.
ER  -