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N° 2008-13 |
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| September 2008 |
| Exporting to Insecure Markets: a Firm-Level Analysis |
Matthieu Crozet
Pamina Koenig
Vincent Rebeyrol |
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| This paper proposes an original approach to investigate the influence of insecurity and institutional
quality on international trade. We emphasize that insecurity is hardly comparable
with other trade barriers such as tariffs because it does not affect all firms similarly. We
develop a monopolistic competition trade model with insecurity as a random additional sunk
cost for exporting firms. A higher level of insecurity may dissuade large firms to export,
while some smaller ones may be able to enter the export market. Hence, insecurity disrupts
firms’ selection into export markets, and this has particular effects on trade margins. Two
discriminating predictions are derived from the model and confronted to the data. Using
individual French firms exports to 100 destination countries, we find clear evidence corroborating
our theoretical predictions. |
Non-technical summary |
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Résumé
non-technique
en français |
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| Full text |
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| Insecurity; institutions; international trade; firm heterogeneity; trade margins |
Keywords |
| F12; D8; K4 |
JEL classification |
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