Why is Exporting Hard in Some Sectors?

Author Name Anders AKERMAN  (Stockholm University) /Rikard FORSLID  (Stockholm University) /OKUBO Toshihiro  (Keio Univesity)
Creation Date/NO. March 2013 13-E-015
Research Project Study of the Creation of the Japanese Economy and Trade and Direct Investment
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This paper models the market entry cost of exporters as dependent on the size of the export market as well as on sector specific factors. We introduce these features in a Melitz trade model with heterogeneous firms. The predictions of our model are tested using Swedish and Japanese firm level data. We find that sector level advertising or sales promotion intensity is an important component of the market entry cost. A larger market size, if anything, lowers entry costs.