Essays on firm heterogeneity and international trade

2015-09-22T10:37:15Z (GMT) by Umut Senalp
This thesis provides four contributions to the literature on the productivity- internationalization nexus by considering some recent developments in the literature. A well-established stylized fact is reported by this literature, which is that exporters are more productive and larger than non-exporters, and two hypotheses attempt to explain this finding. The first, often referred to as the self-selection hypothesis, suggests that more productive firms select themselves into export markets, while the learning-by-exporting hypothesis highlights the role of learning from exporting. In this thesis, first, the self-selection hypothesis is revisited, and it is shown that evidence against self-selection exists in some UK industries. Second, it is demon- strated that some UK firms experience rising marginal costs, although both tra- ditional and new trade theories assume constant marginal cost. It is then shown that the evidence against self-selection that we report can be best explained by the existence of increasing, rather than constant, marginal costs. Third, the learning by exporting hypothesis is tested empirically for UK firms. Highlighting the importance of the scale effect in total factor productivity growth, it is shown that any learning by exporting effects are predominantly attributable to a change in scale efficiency. Unlike Melitz (2003), some recent studies consider some other strategies to access foreign markets, such as foreign direct investment, and cross-border mergers. Finally, following this new branch of the literature, the productivity-internationalization nexus is examined by utilizing a two-country oligopolistic model. It is shown that more productive firm might prefer greenfield investment over cross-border merger, which contradicts the findings provided by the relevant literature.