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on International Activities of Firms |
| By: | Breinlich, Holger; Magli, Martina |
| Abstract: | Services account for one-third of global trade, yet little is known about the impact of trade restrictions on services trade. To make progress in this area, it is crucial to understand through which modes services are traded (cross-border, movement of people, foreign investment or consumption abroad) and how firms substitute among these modes. We provide novel micro-level evidence on firms’ mode choices, combining detailed data on UK firms’ trade and affiliates’ sales. We also estimate the substitution between trade modes using Brexit as an exogenous shock, finding that UK firms increasingly relied on local affiliate sales to serve the EU market after 2016. This shift protected firm-level services exports from expected higher trade barriers after Brexit, but at the cost of lower domestic employment. |
| Keywords: | Brexit |
| JEL: | F13 F14 F16 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19525 |
| By: | Eckel, Carsten; Jäkel, Ina; Macedoni, Luca; Riezman, Raymond |
| Abstract: | Using firm-level data on production and trade from Denmark, we document that firms frequently employ a strategy of entering new export markets with Carry-Along Trade (CAT), i.e., with products manufactured by other firms. This strategy is surprising because, empirically, CAT products have below average market shares and mark-ups, and trade models predict firms to focus on core products with large sales in export markets with additional fixed and variable costs. To rationalize this new stylized fact, we propose a model where CAT plays a pivotal role in enabling firms to learn about market conditions and assess market viability. In our framework, exporting own-produced core products requires upfront sunk entry investments that create a benefit of knowing the exact market conditions. Firms can learn these market conditions by either investing first based on expected market conditions, or by exporting CAT products that do not require additional investments. We provide empirical evidence in support of our mechanism by showing that entering with CAT is particularly prevalent (i) among small firms, (ii) in distant markets, and (iii) among firms with no prior exporting experience. |
| Keywords: | Learning |
| JEL: | F14 F12 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19485 |
| By: | Márta Bisztray (HUN-REN Centre for Economic and Regional Studies); Beata Javorcik (University of Oxford; European Bank for Reconstruction and Development (EBRD)); Helena Schweiger (European Bank for Reconstruction and Development (EBRD)) |
| Abstract: | This paper uses rich firm-level data from Hungary to present some stylized facts on services trade. We show that (i) services exporters are even more rare than goods exporters; (ii) services exports are highly concentrated; (iii) services exporters are more likely than goods exporters to be located in cities; (iv) services exports tend to be preceded by services imports; (v) manufacturing firms also export services with services exports following goods exports in terms of timing and destinations; and (vi) services exporters have comparable premia to goods exporters. |
| Keywords: | trade in services, services exporters, servicification, Hungary |
| JEL: | F14 L80 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:has:discpr:2421 |
| By: | Borchert, Lea; De Haas, Ralph; Kirschenmann, Karolin; Schultz, Alison |
| Abstract: | We study how terminated correspondent banking relationships affect international trade. Drawing on firm-level export data from emerging Europe, we show that when local banks lose access to correspondent services, their corporate clients - especially small- and medium-sized enterprises - experience significant export declines. Firms only partially offset lost exports with higher domestic sales, resulting in lower total revenues and employment. Other firms cease operations entirely. These firm-level impacts aggregate to lower product-level exports from countries more exposed to correspondent bank retrenchment. |
| Keywords: | Correspondent banking |
| JEL: | F14 F15 F36 G21 G28 L14 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19373 |
| By: | Huang, Hanwei; Manova, Kalina; Perelló, Oscar; Pisch, Frank |
| Abstract: | We study the role of firm heterogeneity and imperfect competition for global production networks and the gains from trade. We develop a quantifiable trade model with two-sided firm heterogeneity, matching frictions, and oligopolistic competition upstream. More productive buyers endogenously match with more suppliers, thereby inducing tougher competition among them to enjoy lower input costs and superior performance. Customs data confirms that downstream French and Chilean firms import higher values and quantities at lower prices as upstream Chinese markets become more competitive over time, with stronger responses by larger firms. Moreover, suppliers charge more diversified buyers lower markups. Counterfactual analysis indicates that entry upstream benefits high-productivity buyers, while trade liberalization and lower matching costs favor mid-productivity buyers. Welfare gains are sizable for each shock, greater under package reforms, and significantly reduced with fixed markups or networks. Global production networks thus mediate bigger effects and cross-border spillovers from industrial and trade policies. |
| Keywords: | Production networks; Global value chains; Matching frictions; Imperfect competition; Gains from trade |
| JEL: | D24 F10 F12 F14 L11 L22 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19408 |