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Firms’ entry choices across export products and markets, and the consequences of trade in an open economy: Evidence from China

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  • Egger, Peter H.
  • Li, Jie
  • Wu, Han
Abstract
We outline a model of endogenous choices of market entry and product scope in a partial-equilibrium model of heterogeneous firms with arbitrary productivity. Firms’ choices of interest depend on market characteristics including variable trade and fixed market-entry costs. Conditional on fixed costs, the extent to which firms respond to shocks depends on their (potentially nonparametric) density around the zero-profit threshold. Accordingly, identical changes in, e.g., variable trade costs per product and market can lead to vastly different responses across not only markets and products but also firms. We shed light on the heterogeneity of these responses by estimating parameters and otherwise calibrating the model to firm-and-product-level bilateral trade data for China.

Suggested Citation

  • Egger, Peter H. & Li, Jie & Wu, Han, 2023. "Firms’ entry choices across export products and markets, and the consequences of trade in an open economy: Evidence from China," Journal of Economic Behavior & Organization, Elsevier, vol. 209(C), pages 243-262.
    • Handle: RePEc:eee:jeborg:v:209:y:2023:i:c:p:243-262
    DOI: 10.1016/j.jebo.2023.03.006
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    More about this item

    Keywords

    Trade; Extensive margins; China;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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