Business Intelligence

The Cross Sectional Dynamics Of Heterogenous Trade Models

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Executive Summary

In this paper the author proposes a framework for studying export dynamics and market specific flows in a multi-country model of trade with heterogeneous firms. Countries are asymmetric in terms of their size, the size distribution of potential entrants, properties of firm's idiosyncratic shocks, and trade barriers. The model has predictions in terms of cross-sectional moments and exporter's dynamics. The author shows that persistent productivity shocks are enough to account for, qualitatively, many features of the data. In particular, the model is consistent with observed patterns of entry and exit across markets, export sales distribution, and the life cycle of new exporters.

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