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Are Capital Intensive Firms the Biggest Exporters?

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  • Rikard FORSLID
  • OKUBO Toshihiro

Abstract

This paper starts out from the observation that the export shares of firms (export to sales ratio) vary greatly among firms, and tend to be systematically related to the firms' capital labour ratios. This observation cannot be explained by e.g. the standard Melitz model, since it predicts that all exporting firms have identical export shares. In our model, we relate the difference in export shares to firm level differences in transport costs. Two factors influence a firm's transport cost in our model. First, firm scale can affect transportation costs. Second, we allow for an association between the capital intensity of a firm and its transportation costs. As in our data, we assume this relationship to be sector specific. Our model can generate the result that more productive and capital intensive firms have higher export shares due to scale economies in transportation, but the model can also generate the opposite pattern that more capital intensive firms have lower export shares due to a strong positive association between capital labour ratio and transportation costs. We use Japanese manufacturing firm level data to calibrate our model by matching firm level export shares to data sector by sector. Regressing the calibrated transportation costs on actual data then shows that the calibrated (calculated) numbers can explain about half of the variation in the data.

Suggested Citation

  • Rikard FORSLID & OKUBO Toshihiro, 2011. "Are Capital Intensive Firms the Biggest Exporters?," Discussion papers 11014, Research Institute of Economy, Trade and Industry (RIETI).
  • Handle: RePEc:eti:dpaper:11014
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    References listed on IDEAS

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    Cited by:

    1. Luis Castro & Ben G. Li & Keith E. Maskus & Yiqing Xie, 2016. "Fixed Export Costs and Export Behavior," Southern Economic Journal, John Wiley & Sons, vol. 83(1), pages 300-320, July.
    2. Ogawa, Kazuo & Saito, Mika & Tokutsu, Ichiro, 2017. "Did divine wind rescue Japan out of the lost decade?," Journal of the Japanese and International Economies, Elsevier, vol. 44(C), pages 39-51.
    3. Mr. Ichiro Tokutsu & Mr. Kazuo Ogawa & Mika Saito, 2012. "Japan out of the Lost Decade: Divine Wind or Firms’ Effort?," IMF Working Papers 2012/171, International Monetary Fund.
    4. Bouët, Antoine & Vaubourg, Anne-Gaël, 2016. "Financial constraints and international trade with endogenous mode of competition," Journal of Banking & Finance, Elsevier, vol. 68(C), pages 179-194.
    5. Volpe Martincus, Christian & Blyde, Juan, 2013. "Shaky roads and trembling exports: Assessing the trade effects of domestic infrastructure using a natural experiment," Journal of International Economics, Elsevier, vol. 90(1), pages 148-161.
    6. Clément Nedoncelle & Julien Wolfersberger, 2024. "Weather Shocks and Firm Exports in Developing Countries [Chocs météorologiques et exportations des firmes dans les pays en développement]," Working Papers hal-03753384, HAL.
    7. Xuan Wei & Suzanne Thornsbury & David Schweikhardt, 2017. "Hurdles to Exporting: A Decomposition of Fixed Export Costs," Review of Economics & Finance, Better Advances Press, Canada, vol. 7, pages 1-18, February.
    8. Clément Nedoncelle & Julien Wolfersberger, 2024. "Weather Shocks and Firm Exports in Developing Countries [Chocs météorologiques et exportations des firmes dans les pays en développement]," Post-Print hal-03753384, HAL.
    9. OGAWA Kazuo & TOKUTSU Ichiro, 2015. "Hysteresis in Japanese Export Market: A Dynamic Random-Effect Probit Approach to Panel Data of Japanese Machinery-manufacturing Firms," Discussion papers 15031, Research Institute of Economy, Trade and Industry (RIETI).

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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration

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