An Anatomy of International Trade: Evidence from French Firms
We examine the sales of French manufacturing firms in 113 destinations, including France itself. Several regularities stand out: (1) the number of French firms selling to a market, relative to French market share, increases systematically with market size; (2) sales distributions are very similar across markets of very different size and extent of French participation; (3) average sales in France rise very systematically with selling to less popular markets and to more markets. We adopt a model of firm heterogeneity and export participation which we estimate to match moments of the French data using the method of simulated moments. The results imply that nearly half the variation across firms that we see in market entry can be attributed to a single dimension of underlying firm heterogeneity, efficiency. Conditional on entry, underlying efficiency accounts for a much smaller variation in sales in any given market. Parameter estimates imply that fixed costs eat up a little more than half of gross profits. We use our results to simulate the effects of a counterfactual decline in bilateral trade barriers on French firms. While total French sales rise by around US$16 billion, sales by the top decile of firms rise by nearly US$23 billion. Every lower decile experiences a drop in sales, due to selling less at home or exiting altogether.
We thank Costas Arkolakis, Christopher Flinn, Jeremy Fox, Xavier d'Haultfoeuille, and Azeem Shaikh for extremely useful comments and Dan Lu for research assistance. The authors have presented the paper at many venues, in particular the conference to celebrate the scientific contributions of Robert E. Lucas, Jr., April 2007. Eaton and Kortum gratefully acknowledge the support of the National Science Foundation under grant number SES-0339085. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.
Jonathan Eaton & Samuel Kortum & Francis Kramarz, 2011. "An Anatomy of International Trade: Evidence From French Firms," Econometrica, Econometric Society, vol. 79(5), pages 1453-1498, 09. citation courtesy of