Do trade policy differences induce sorting? Theory and evidence from Bangladeshi apparel exporters

Svetlana Demidova, Hiau Looi Kee, Kala Krishna

Research output: Contribution to journalArticle

8 Scopus citations

Abstract

This paper provides a new heterogeneous firm model for trade where firms differ in their productivity and experience different market demand shocks. The model incorporates the variations in trade policy, trade preferences, and the rules of origin needed to obtain them that are faced by Bangladeshi garment exporters to the US and EU. We estimate firm's productivity using an extension of the Olley Pakes procedure that accounts for the biases arising from both demand shocks and productivity being unobserved. Predictions of the model are then tested non-parametrically and are shown to be supported empirically.

Original languageEnglish (US)
Pages (from-to)247-261
Number of pages15
JournalJournal of International Economics
Volume87
Issue number2
DOIs
StatePublished - Jul 1 2012

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

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