these-shepherd-2008
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these-shepherd-2008

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Institut d'Etudes Politiques de Paris ECOLE DOCTORALE DE SCIENCES PO Programme doctoral Economie des relations internationales Groupe d’Economie Mondiale de Sciences Po (GEM) Doctorat de Sciences Economiques Development Perspectives on Trade Growth at the Extensive Margin Benjamin SHEPHERD Thèse dirigée par M. le Professeur Patrick Messerlin Soutenue en mars 2008 Jury : M. Chad P. Bown, Associate Professor of Economics, Brandeis University M. Joseph F. Francois, Professor of Economics, Johannes Kepler Universität (Rapporteur) M. Bernard M. Hoekman, Senior Advisor and Research Manager (Trade), The World Bank (Rapporteur) M. Patrick A. Messerlin, Professeur des Universités à l’Institut d’Etudes Politiques de Paris (Directeur de recherche) DevelopmentPerspectivesonTradeGrowthattheExtensiveMarginContentsAbstract 5RØsumØ 6Acknowledgements 7GeneralIntroduction 11ExtensiveMarginGrowthandFirmHeterogeneity: ADevelopmentPerspective . . . . . 13TradePolicy,RegulatoryBarriers,andInstitutions . . . . . . . . . . . . . . . . . . . . . 17StructureoftheDissertationandOutlineofMainResults . . . . . . . . . . . . . . . . . 20ChapterOne: "TradeCosts,BarrierstoEntry,andExportDiversi cationinDevel-opingCountries" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20ChapterTwo: "ExportingtoNewMarkets: AnEmpiricalInvestigation" . . . . . . 22Chapter Three: "Export Variety and International Harmonization of Product Stan-dards" . . . . . . ...

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Institut d'Etudes Politiques de Paris
ECOLE DOCTORALE DE SCIENCES PO
Programme doctoral Economie des relations internationales
Groupe d’Economie Mondiale de Sciences Po (GEM)
Doctorat de Sciences Economiques
Development Perspectives on Trade Growth at
the Extensive Margin
Benjamin SHEPHERD
Thèse dirigée par M. le Professeur Patrick Messerlin
Soutenue en mars 2008
Jury :
M. Chad P. Bown, Associate Professor of Economics, Brandeis University
M. Joseph F. Francois, Professor of Economics, Johannes Kepler Universität
(Rapporteur)
M. Bernard M. Hoekman, Senior Advisor and Research Manager (Trade), The
World Bank (Rapporteur)
M. Patrick A. Messerlin, Professeur des Universités à l’Institut d’Etudes Politiques
de Paris (Directeur de recherche)



DevelopmentPerspectivesonTradeGrowthattheExtensiveMargin
Contents
Abstract 5
RØsumØ 6
Acknowledgements 7
GeneralIntroduction 11
ExtensiveMarginGrowthandFirmHeterogeneity: ADevelopmentPerspective . . . . . 13
TradePolicy,RegulatoryBarriers,andInstitutions . . . . . . . . . . . . . . . . . . . . . 17
StructureoftheDissertationandOutlineofMainResults . . . . . . . . . . . . . . . . . 20
ChapterOne: "TradeCosts,BarrierstoEntry,andExportDiversi cationinDevel-
opingCountries" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ChapterTwo: "ExportingtoNewMarkets: AnEmpiricalInvestigation" . . . . . . 22
Chapter Three: "Export Variety and International Harmonization of Product Stan-
dards" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
I TradeCosts,BarrierstoEntry,andExportDiversi cationinDevelopingCountries 31
A Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
B DataandStylizedFacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
1 MeasuringExportDiversi cation . . . . . . . . . . . . . . . . . . . . . . 35
2theCostsofTradeandDomesticMarketEntry . . . . . . . . . 38
3 Non-ParametricEvidence . . . . . . . . . . . . . . . . . . . . . . . . . . 40
C TheoreticalModel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
1 ConsumptionBlock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SHEPHERD,Benjamin-ThŁseIEPdeParis-2008 1DevelopmentPerspectivesonTradeGrowthattheExtensiveMargin
2 ProductionBlock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
3 CharacterizingExportDiversi cationandSimulatingtheModel . . . . . . 47
D EmpiricalModelandResults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
1 InstrumentalVariablesStrategy . . . . . . . . . . . . . . . . . . . . . . . 55
2 AlternativeMeasuresofDiversi cation,EntryCosts,andTradeCosts . . . 58
3 AdditionalIndependentVariables . . . . . . . . . . . . . . . . . . . . . . 59
4 NarrowerCountrySamples . . . . . . . . . . . . . . . . . . . . . . . . . . 60
5 AlternativeEstimators . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
E ConclusionsandPolicyImplications . . . . . . . . . . . . . . . . . . . . . . . . . 61
F References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
G Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
H Figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
II ExportingtoNewMarkets:AnEmpiricalInvestigation 77
A Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
B TheoreticalMotivation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
1 ConsumptionBlock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
2 ProductionBlock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
3 CharacterizingGeographicalDiversi cation . . . . . . . . . . . . . . . . . 86
C PreliminaryAnalysis:FirmLevelEmpirics . . . . . . . . . . . . . . . . . . . . . 89
1 ProductivityEstimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
2 ProductivityandtheNumberofExportMarkets . . . . . . . . . . . . . . . 94
D CountryLevelEmpirics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
1 Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
2 Model,EstimationResults,andRobustnessChecks . . . . . . . . . . . . . 100
SHEPHERD,Benjamin-ThŁseIEPdeParis-2008 2DevelopmentPerspectivesonTradeGrowthattheExtensiveMargin
3 RobustnessChecks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
4 InstrumentalVariablesResults . . . . . . . . . . . . . . . . . . . . . . . . 104
E ConclusionsandFurtherResearch . . . . . . . . . . . . . . . . . . . . . . . . . . 107
F References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
G Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
III ProductStandards,Harmonization,andTrade:EvidencefromtheExtensiveMargin127
A Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
B TheoreticalMotivation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
1 ConsumptionBlock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
2 ProductionBlock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
3 ModelingProductStandardHarmonization . . . . . . . . . . . . . . . . . 136
4 SimulationResults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
C DataandStylizedFacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
1 TheEUStandardsDatabase . . . . . . . . . . . . . . . . . . . . . . . . . 141
2 MeasuringExportVariety . . . . . . . . . . . . . . . . . . . . . . . . . . 143
D EmpiricalModelandEstimationResults . . . . . . . . . . . . . . . . . . . . . . . 145
1 InstrumentalVariablesResults . . . . . . . . . . . . . . . . . . . . . . . . 147
2 Robustness Checks: Quotas, Income Levels, and Regional or Preferential
Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
E Conclusions,PolicyImplications,andFutureResearch . . . . . . . . . . . . . . . 152
F References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154
G Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158
H Figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162
SHEPHERD,Benjamin-ThŁseIEPdeParis-2008 3DevelopmentPerspectivesonTradeGrowthattheExtensiveMargin
GeneralConclusion 165
PolicyImplications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
DirectionsforFutureResearch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169
EndogeneityofTradeCosts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169
Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170
TechnologicalChangeandProductivityGrowth . . . . . . . . . . . . . . . . . . . 171
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172
SHEPHERD,Benjamin-ThŁseIEPdeParis-2008 4DevelopmentPerspectivesonTradeGrowthattheExtensiveMargin
Abstract
This dissertation examines the links between international trade and economic development
throughthelensofexportgrowthattheextensivemargin. Byextensivemargingrowthismeantei-
thertradeinpreviouslyuntradedproducts,ortradeinexistingproductsbetweennewcountrypairs.
The three chapters of this dissertation represent some of the rst contributions to the literature in
this area with an approach anchored in development policy concerns. They contribute to a clearer
understandingofthelinksbetween rmheterogeneity,extensivemargingrowth,anddevelopment.
In addition, they provide new insights into the importance of domestic regulations and institutions
intermsofdevelopingcountrytradeperformance. ChapterIshowsthatdiversi cationintheprod-
uctdimensionisin uencedbythecostsoftradeandmarketentryintheexportingcountry. Chapter
II shows that similar factors also affect diversi cation in the geographical dimension. Chapter III
takes the opposite approach, showing that product standards in importing countries can affect ex-
portdiversi cationoverseas. Allthreechaptersusetrademodelsincorporatingheterogeneous rms
tomotivatetheempiricalworkundertaken.
SHEPHERD,Benjamin-ThŁseIEPdeParis-2008 5DevelopmentPerspectivesonTradeGrowthattheExtensiveMargin
RØsumØ
Dans cette thŁse, nous examinons les liens entre commerce international et dØveloppement
Øconomique?traversleconceptdemargeextensiveducommerce. L’onconsidŁrecommepartici-
pant ? la croissance de cette marge, l’apparition de nouveaux ux de commerce, qu’ils concernent
la commercialisation d’un bien jusqu’ici non ØchangØ ou la commercialisation de produits dØj
ØchangØsmaisentredespaysn’enfaisantpaslecommerceauparavant. Lestroischapitresdecette
thŁse constituent l’une des premiŁres tentatives d’analyse de ces questions se concentrant sur la
situationdespaysendØveloppement. Ilscontribuentainsi?unemeilleurecomprØhensiondesliens
entre hØtØrogØnØitØ des entreprises, croissance de la marge extensive du commerce, et dØveloppe-
ment. Enoutre,cetravailpermetdemettreplusclairementenØvidenceler ledesrŁglementations
et des institutions nationales dans la performance commerciale des pays en dØveloppement. Le
premier chapitre montre que la diversi cation des exportations en termes du nombre de produits
exportØs est fonctiondes coßts de l’Øchange et descoßts d’Øtablissement d’entreprise dans lepays
exportateur. Le chapitre 2 Ølargit ces rØsultats en montrant que ces facteurs comptent, Øgalement,
dansladiversi cationgØographiquedesexportations. En n,letroisiŁmechapitreabordecesques-
tions par une approche contraire, en Øtudiant l’impact des normes techniques d’un pays impor-
tateur sur la diversi cation des exportations de ses partenaires. Ces trois chapitres se basent sur
desmodŁlesthØoriques prenantencomptel’hØtØrogØnØitØdes entreprisesquijusti entlestravaux
empiriquesentrepris.
SHEPHERD,Benjamin-ThŁseIEPdeParis-2008 6DevelopmentPerspectivesonTradeGrowthattheExtensiveMargin
Acknowledgements
Mysincerethankstothemembersofmyjury,ChadBown,JoeFrancois,andBernardHoekman,
for having agreed to take part in my defense. I am particularly grateful to Joe and Bernard for
acceptingtoactasrapporteurs.
PatrickMesserlin,myadvisor,hasbeenaconstantsourceofsupportandencouragement,andI
have always appreciated the time he has been willing to invest in providing advice and comments.
The three years I spent at the Groupe d’Economie Mondiale in Paris were productive, rewarding,
and very enjoyable. I am most grateful to Professor Messerlin for having made such a pleasant
environmentavailabletome,andforhavingintegratedmeintotheresearchandteachinglifeofthe
GEM.AhugethankyouisalsoduetoBarbaraBenderforherwonderfulorganizationalskills,both
duringmytimeattheGEMandwhile nishingmydissertationandpreparingmydefensefromthe
othersideoftheAtlantic.
It helped immeasurably to be able to share experiences (and pain) with other dissertation writ-
ers at the GEM, particularly GØraldine Kutas, and my former of cemates Julien Hanoteau and
SØbastien Miroudot. It was at the GEM with Daria Taglioni that I discovered the pleasures of rm
heterogeneity, little knowing how much time I would end up spending with Pareto distributions,
extensivemargins,andalltherestofit.
Many people have been kind enough to read and provide comments on the various parts of
my dissertation: Silja Baller, Allen Dennis, Simeon Djankov, Felix Eschenbach, Ana Margarida
Fernandes,MatthiasHelble,DanielLederman,WillMartin,BeataSmarzynskaJavorcik,Christian
Volpe Martincus, and John S. Wilson. I am very grateful for all of your efforts, and in particular
for those of Bernard Hoekman who provided extremely helpful advice in relation to just about all
of the work presented here (and a good deal more besides). Special thanks also to Allen Dennis,
whoallowedmetomakeuseofourjointworkinChapterI.
SHEPHERD,Benjamin-ThŁseIEPdeParis-2008 7DevelopmentPerspectivesonTradeGrowthattheExtensiveMargin
Ungrandmerci?ClaireDelpeuch,quiacorrigØtous/-tesmesfautesdefran ais.
ThereisnowaythatIcouldhave nishedthisdissertationwithoutthehelp,support,and(mostly
good-natured) prodding of friends and family, even those like my parents far away. Robert and
Marie-Fran oise were incredibly tolerant of a new son-in-law who must have seemed unduly at-
tached to his computer. I’m looking forward to being 100% present at family lunches and trips
fromnowon!
SpecialthankstoMitchO’Brienforhisconstantsupport,regularlunchcompany,andfrequent
raising of eyebrows. Tony and Sara McGarvey, and Anita and Seamus O’Hart rarely missed an
opportunity to ask me when I would "really" be nished. If they hadn’t, I would probably still be
touchingupChapterI.
Finally,IhardlyknowwhattosaytoMØlanie.
Forstarters:IT’SFINISHED!REALLY!!
Thank you so much for all your love, understanding, and support. And for being patient at
the right times, as well as impatient when I desperately needed it. I can’t wait to start having our
eveningsandweekendsback!
SHEPHERD,Benjamin-ThŁseIEPdeParis-2008 8