Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/170639
Authors: 
Assenza, Tiziana
Delli Gatti, Domenico
Grazzini, Jakob
Ricchiuti, Giorgio
Year of Publication: 
2016
Series/Report no.: 
Working Paper 42
Abstract: 
In his seminal paper, starting from the premise that productivity is heterogeneous across firms, Melitz (2003) nicely accounts for the stylized fact that the level of individual productivity is key in determining the capability of a firm to export. In this paper we build a model along Melitz's lines to show that also financial capacity, captured by the level of individual net worth, affects the behaviour of firms on international markets. In our framework, in fact, the decision to export depends on both productivity and net worth, and both are heterogeneous across firms. We show that firms with low productivity may still be able to penetrate foreign markets provided they have enough net worth to incur the cost of exporting. However, even a really high net worth may not guarantee the presence in both domestic and foreign markets if the firm does not have a minimum level of productivity. Finally, we explore the effects of changes in transport costs, fixed costs for exporters and the financial constraints.
Subjects: 
Productivity
Net Worth
International trade
Heterogeneous firms
JEL: 
E44
F12
F14
F21
Document Type: 
Working Paper

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