Volatility in the Small and in the Large: The Lack of Diversification in International Trade

71 Pages Posted: 3 Oct 2016

See all articles by Francis Kramarz

Francis Kramarz

National Institute of Statistics and Economic Studies (INSEE) - National School for Statistical and Economic Administration (ENSAE); National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST)

Julien Martin

University of Quebec at Montreal (UQAM)

Isabelle Mejean

Institut d'Etudes Politiques de Paris (Sciences Po) - Department of Economics

Date Written: September 2016

Abstract

We study how different sources of fluctuations interact with the micro-structure of trade networks to shape the volatility of exports at the firm-level and in the aggregate. Four shocks affect transactions -- a macroeconomic shock and three individual shocks hitting the exporters, their foreign partners, and their matches. We structurally estimate these shocks using data on the transactions connecting French exporters to their individual European buyers. Individual shocks explain half of aggregate fluctuations and the entirety of individual fluctuations. The volatility of sales across firms and countries are well-explained by the cross-sectional heterogeneity in the diversification of their trade networks.

Keywords: Aggregate fluctuations, Firm-level volatility, firm-to-firm trade

JEL Classification: D22, E32, F14

Suggested Citation

Kramarz, Francis and Martin, Julien and Mejean, Isabelle, Volatility in the Small and in the Large: The Lack of Diversification in International Trade (September 2016). CEPR Discussion Paper No. DP11534, Available at SSRN: https://ssrn.com/abstract=2847068

Francis Kramarz (Contact Author)

National Institute of Statistics and Economic Studies (INSEE) - National School for Statistical and Economic Administration (ENSAE) ( email )

92245 Malakoff Cedex
France

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST)

15 Boulevard Gabriel Peri
Malakoff Cedex, 1 92245
France

Julien Martin

University of Quebec at Montreal (UQAM) ( email )

PB 8888 Station DownTown
Succursale Centre Ville
Montreal, Quebec H3C3P8
Canada

Isabelle Mejean

Institut d'Etudes Politiques de Paris (Sciences Po) - Department of Economics ( email )

28, rue des Saints peres
Paris, 75007
France

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