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Exporters' productivity and margins of trade deflection: theory and micro-evidence.

Authors :
Hyun, Hea-Jung
Jang, Yong Joon
Source :
Journal of International Trade & Economic Development. Jun2024, Vol. 33 Issue 4, p665-693. 29p.
Publication Year :
2024

Abstract

This paper examines how firm heterogeneity plays a role in trade deflection effects when exporters exit trading partners' markets with trade-restrictive measures and deflect exports toward third markets with less stringent ones. We develop a Cournot-type three-country theoretical framework that highlights the role of firm productivity in trade deflection effects of trade-restrictive measures and empirically examine research hypotheses using a firm–product–destination level panel data of Korean exporting firms during the 1996–2010 period. We find that highly productive firms facing higher tariffs are more likely to deflect export to new third-country markets with lower tariffs as alternatives. However, once they enter the third destination, the positive effect of tariffs on the deflection of trade volume is less prominent for highly productive firms due to a lower trade destruction effect for them. Our results imply that the magnitude of trade deflection at both the intensive and extensive margins can be heterogeneous across firm productivity and multi-destination status. [ABSTRACT FROM AUTHOR]

Details

Language :
English
ISSN :
09638199
Volume :
33
Issue :
4
Database :
Academic Search Index
Journal :
Journal of International Trade & Economic Development
Publication Type :
Academic Journal
Accession number :
177218092
Full Text :
https://doi.org/10.1080/09638199.2023.2222416