Entry, trade, and exporting over the cycle

George Alessandria, Horag Choi

Research output: Contribution to journalArticleResearchpeer-review

Abstract

We study how international trade and exporting affect the cyclicality of establishment creation. We build a general equilibrium model with two features: (i) new establishments start small and grow gradually and (ii) exporters are persistently bigger and more productive than nonexporters. When establishments creation costs fluctuate with aggregate productivity, the model generates procyclical fluctuations in domestic establishments and importers. Without international trade, entry is weakly countercyclical and too smooth. The model generates reasonable fluctuations in the stock of importers, exporters, and domestic establishments. With an entry margin, output is hump-shaped following a productivity shock and this hump is stronger with trade.

Original languageEnglish
Pages (from-to)83-126
JournalJournal of Money Credit and Banking
Volume51
Issue numberS1
DOIs
Publication statusPublished - 1 Dec 2019

Keywords

  • E32
  • establishment heterogeneity
  • exporter
  • F41
  • firm entry
  • sunk export cost

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