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The Role of Exporting and Trade for Entry over the Business Cycle

Author

Listed:
  • Horag Choi

    (University of Auckland)

  • George Alessandria

    (Federal Reserve Bank of Philadelphia)

Abstract
This paper studies the role of international trade and the export participation decisions of establishments for the entry of establishments over the business cycle in a general equilibrium model. The model captures two key features of establishment and exporter dynamics: i) new establishments start small and grow over time and ii) exporters tend to be bigger and more productive than non-exporters. When the cost of creating establishments fluctuates with aggregate productivity, we find the model can generate procyclical fluctuations in the stock of domestic establishments and importers similar to the data. The model also generates fluctuations in the stock of importers, exporters, and domestic establishments of similar magnitude to those in the data. Without international trade, both intratemporal and intertemporal, entry is countercyclical and too smooth compared to the data. With an entry margin, we also find that output is hump-shaped following a productivity shock since investments in creating establishments and exporters generate an incentive to delay accumulating physical capital.

Suggested Citation

  • Horag Choi & George Alessandria, 2009. "The Role of Exporting and Trade for Entry over the Business Cycle," 2009 Meeting Papers 355, Society for Economic Dynamics.
    • Handle: RePEc:red:sed009:355
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    References listed on IDEAS

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    Cited by:

    1. Borota Milicevic, Teodora & Carlsson, Mikael, 2016. "Markups from Inventory Data and Export Intensity," Working Paper Series 2016:9, Uppsala University, Department of Economics.
    2. Fariha Kamal & C.J. Krizan, 2012. "Decomposing Aggregate Trade Flows: New Evidence from U.S. Traders," Working Papers 12-17, Center for Economic Studies, U.S. Census Bureau.

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