Andres Rodriguez-Clare (UC Berkeley) will present “The Intensive Margin in Trade” tomorrow, October 30th, at the International Trade Seminar at Tuck School of Business.
His presentation begins at 12:15pm on Tuesday, October 30, 2018 in (051 Buchanan) Volanakis - TUCK
Lunch will be served at
noon.
Here is an abstract of his paper: The Melitz model highlights the importance of the extensive margin (the number of firms exporting) for trade flows. Using the World Bank’s Exporter Dynamics
Database (EDD) featuring firm-level exports from 50 countries, we find that around 50% of variation in exports is along the extensive margin — a quantitative victory for the Melitz framework. The remaining 50% on the intensive margin (exports per exporting
firm) contradicts a special case of Melitz with Pareto-distributed firm productivity, which has become a tractable benchmark. This benchmark model predicts that, conditional on the fixed costs of exporting, all variation in exports across trading partners
should occur on the extensive margin. We find that moving from a Pareto to a lognormal distribution allows the Melitz model to match the role of the intensive margin in the EDD. We use likelihood methods and the EDD to estimate a generalized Melitz model with
a joint lognormal distribution for firm-level productivity, fixed costs and demand shifters, and use “exact hat algebra” to quantify the effects of a decline in trade costs on trade flows and welfare in the estimated model. The welfare effects turn out to
be quite close to those in the standard Melitz-Pareto model when we choose the Pareto shape parameter to fit the average trade elasticity implied by our estimated Melitz-lognormal model, although there are significant differences regarding the effects on trade
flows.
If you will be attending the Lunch Seminar please RSVP to Galen Muskat at TUCK so he can order the appropriate amount of food.
Galen F. Muskat | Academic Coordinator
Tuck School of Business at Dartmouth
310 Tuck Hall | Hanover, NH 03755-9000
P: (603) 646-1862