Global Economics: Falling trade Costs Free Essay, Term Paper and Book Report
Global Economics: Falling Trade Costs
Remington College
Scott Cheek
September 8, 2005
Abstract
This paper examines the response of industries and firms to changes in trade costs. New firm level models of international trade with heterogeneous firms predict that industry productivity will rise as trade costs fall due to the reallocation of activity across plants within an industry. Using disaggregated U.S. import data, we create a new measure of trade costs over time and industries. As the models predict, productivity growth is faster in industries with falling trade costs. We also
find evidence supporting the major hypotheses of the heterogeneous-firm models. Low productivity plants in industries with falling trade costs are more likely to die. Relatively high productivity nonexporters are more likely to start exporting in response to falling trade costs. Existing exporters increase their shipments abroad. The results do not apply equally across all sectors but are strongest for industries mos......
Word Count: 2251
Page Count: 9 (250 words a page / double spaced)
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