Do Non-Exporters Lose from Lower Trade Costs?

30 Pages Posted: 22 Jun 2020

See all articles by Facundo Piguillem

Facundo Piguillem

Einaudi Institute for Economics and Finance (EIEF)

Loris Rubini

University of New Hampshire

Date Written: May 27, 2020

Abstract

We study the reaction of non-exporters to openness. While static models suggest non-exporters lose from openness, dynamic ones where firms can innovate allow for gains from internalizing future exports. Developing a tractable model with productivity choices where both effects are present, we show analytically that the former effect dominates for small non-exporters, while the latter dominates for large ones. Calibrating to U.S. data, 59% of non-exporters gain with openness, and the average non-exporter growth rate increases by 0.02% per point drop in trade costs.

Keywords: Non-Exporters and Trade Costs, Innovation and Trade, Firm Dynamics

JEL Classification: F1, L11, O3

Suggested Citation

Piguillem, Facundo and Rubini, Loris, Do Non-Exporters Lose from Lower Trade Costs? (May 27, 2020). Available at SSRN: https://ssrn.com/abstract=3611792 or http://dx.doi.org/10.2139/ssrn.3611792

Facundo Piguillem

Einaudi Institute for Economics and Finance (EIEF) ( email )

Via Sallustiana, 62
Rome, 00187
Italy

Loris Rubini (Contact Author)

University of New Hampshire ( email )

NH
United States

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