Friday, September 10, 2010

Manufacturers That Ship Further Domestic Distances Export More

From the research paper, "EXPORTS, BORDERS, DISTANCE, AND PLANT SIZE" by Thomas J. Holmes, University of Minnesota, Federal Reserve Bank of Minneapolis, and NBER and John J. Stevens, Board of Governors of the Federal Reserve System:
The fact that large manufacturing plants export relatively more than small plants has been at the foundation of much work in the international trade literature. We examine this fact using Census micro data on plant shipments from the Commodity Flow Survey. We show the fact is not entirely an international trade phenomenon; part of it can be accounted for by the effect of distance, distinct from any border effect. Export destinations tend to be further than domestic destinations, and large plants tend to ship further distances even to domestic locations, as compared with small plants. We develop an extension of the Melitz (2003) model and use it to set up an analysis with model interpretations of ratios between large plant and small plant shipments that can be calculated with the data. We obtain a decomposition of the overall ratio into a term that varies with distance, holding fixed the border, and a term that varies with the border, holding fixed the distance. The distance term accounts for more than half of the overall difference.
Free download of the Holmes and Stevens paper is available here.

1 comment :

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