Heterogeneous Firms and International Trade: The Role of Productivity and Financial Fragility

Giorgio Ricchiuti, University of Florence

Starting from the premise that productivity is heterogeneous across firms, Melitz (2003) explains why 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. 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. In this setting, we explore the effects of changes in transport costs, fixed costs for exporters and of financial constraints.

About the speaker
Giorgio Ricchiuti defended his PhD at the University of Florence (Italy) with a thesis in empirical and theoretical international economics on the exchange rate. He is currently Associate Professor at the Department of Economics and Management of the University of Florence (IT), fellow at Complexity Lab in Economics (Catholic University in Milan) and instructor of Macroeconomics at New York University in Florence. His research has been regarding dynamic models with heterogeneous agents and bounded rationality in financial markets, industrial organization market structure and, recently, in international trade. Moreover, from an empirical point of view, it has been focusing on how different modes of internationalization (mainly FDI) affect productivity, sales and firms’ survival probability.

Venue: Conference room (room 0.16 & 0.17)

Date: 17 November 2016

Time: 12:00 - 13:00