An Anatomy of International Trade: Evidence from French Firms

75 Pages Posted: 29 Dec 2008 Last revised: 28 Jan 2009

See all articles by Jonathan Eaton

Jonathan Eaton

Leonard N. Stern School of Business - Department of Economics; National Bureau of Economic Research (NBER)

Samuel S. Kortum

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER)

Francis Kramarz

Independent

Multiple version iconThere are 2 versions of this paper

Date Written: December 2008

Abstract

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.

Suggested Citation

Eaton, Jonathan and Kortum, Samuel S. and Kramarz, Francis, An Anatomy of International Trade: Evidence from French Firms (December 2008). NBER Working Paper No. w14610. Available at SSRN: https://ssrn.com/abstract=1320855

Jonathan Eaton (Contact Author)

Leonard N. Stern School of Business - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Samuel S. Kortum

University of Chicago - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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United States

Francis Kramarz

Independent

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