- (1987): “Product Differentiation and Industrial Structure,†Journal of Industrial Economics, 36(2), 131–46.
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- (1998): Technology and Market Structure: Theory and History. MIT Press, Cambridge Mass.
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- (1999): “Exceptional Exporter Performance: Cause, Effect, or Both?,†Journal of International Economics, 47, 1–25.
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- (2000): “Output Price and Markup Dispersion in Micro Data: The Roles of Producer Heterogeneity and Noise,†in Advances in Applied Microeconomics, vol. 9, ed. by M. R. Baye, pp. 1–36. Elsevier Science, JAI, Amsterdam, New York and Tokyo.
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- (2003): “The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity, †Econometrica, 71(6), 1695–1725.
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- (2004b): “Product Substitutability and Productivity Dispersion,†Review of Economics and Statistics, 86(2), 534 – 550.
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- (2005): “Factor Adjustments After Deregulation: Panel Evidence from Colombian Plants,†NBER Working Paper No. 11656.
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- (2006): “Plant Turnover and Structural Reforms in Colombia,†IMF Staff Papers, 53, 58 – 75.
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- (2006b): “Multi-Product Firms and Trade Liberalization,†Unpub. paper, Tuck School of Business, Dec.
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- (2007): “Firm Structure, Multinationals, and Manufacturing Plant Deaths,†Review of Economics and Statistics, 89(2), 193 – 204.
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- (2007): “Prices, Spatial Competition, and Heterogeneous Producers: An Empirical Test,†Journal of Industrial Economics, 55(2), 197–222.
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- (2007): “Quality, Trade and the Moving Window: The Globalization Process,†Economic Journal, 117, F469–F498.
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- (2007): “Trade Reforms and Market Selection: Evidence from Manufacturing Plants in Colombia,†Unpub. paper, University of Maryland.
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- Ã Ã − 1 −Ã XPÃ ÕÃ (A11f) which correspond exactly to the Melitz (2003) model when transport costs are zero.
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Abowd, J., F. Kramarz, and A. Moreau (1996): “Product Quality and Worker Quality,†Annales d’Economie et de Statistique, 41/42.
Abowd, J., F. Kramarz, and D. Margolis (1999): “High Wage Workers and High Wage Firms,†Econometrica, 67(2), 251–333.
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- Advertising and R&D/sales ratio: Ratio of advertising plus research and development (R&D) expenditures to total sales, from the U.S. Federal Trade Commission (FTC) 1975 Line of Business Survey. Converted from FTC 4-digit industry classification to ISIC 4-digit rev. 2 classification using verbal industry descriptions.
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- Advertising/sales ratio: Ratio of advertising expenditures to total sales at sector level, from the U.S. Federal Trade Commission (FTC) 1975 Line of Business Survey. Converted from FTC 4-digit industry classification to ISIC 4-digit rev. 2 classification using verbal industry descriptions.
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- All monetary variables have been deflated to constant 1998 values using the national producer price index. Average 1998 exchange rate: 1,546 pesos/US$1.
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- Anderson, S. P., A. de Palma, and J.-F. Thisse (1992): Discrete-Choice Theory of Product Differentiation. MIT Press, Cambridge, MA.
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Andrabi, T., M. Ghatak, and A. I. Khwaja (2006): “Subcontractors for Tractors: Theory and Evidence on Flexible Specialization, Supplier Selection, and Contracting,†Journal of Development Economics, 79, 273–302.
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- Antràs, P. (2003): “Firms, Contracts, and Trade Structure,†Quarterly Journal of Economics, 118(4), 1375 – 1418.
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Atkeson, A., and P. J. Kehoe (2005): “Modeling and Measuring Organization Capital,†Journal of Political Economy, 113(5), 1026 – 1053.
- Average blue-collar earnings: Annual wage bill of permanent, remunerated blue-collar workers, in millions of 1998 Colombian pesos, divided by number of permanent, remunerated blue-collar workers on Nov. 15 of corresponding year. Blue-collar workers are defined as operators (obreros and operarios) and apprentices (aprendices). The white-collar/blue-collar distinction is available on a consistent basis only for 1982-1994.
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- Average earnings: Total annual wage bill of permanent, remunerated workers, in millions of 1998 Colombian pesos, divided by total number of permanent, remunerated workers on Nov. 15 of corresponding year.
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- Average white-collar earnings: Annual wage bill of permanent, remunerated white-collar workers, in millions of 1998 Colombian pesos, divided by number of permanent, remunerated white-collar workers on Nov. 15 of corresponding year. White-collar workers defined as managers (directivos), non-production salaried workers (empleados), and technical employees (teÃŒÂcnicos). The white-collar/blue-collar distinction is available on a consistent basis only for 1982-1994.
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Aw, B. Y., and G. Batra (1999): “Wages, Firm Size, and Wage Inequality: How Much Do Exports Matter?,†in Innovation, Industry Evolution, and Employment, ed. by D. B. Audretsch, and A. R. Thurik, pp. 13–56. Cambridge University Press, Cambridge, New York and Melbourne.
Aw, B. Y., G. Batra, and M. J. Roberts (2001): “Firm Heterogeneity and Export-Domestic Price Differentials: A Study of Taiwanese Electronics Products,†Journal of International Economics, 54(1), 149–169.
Baker, M., and N. M. Fortin (2001): “Occupational Gender Composition and Wages in Canada, 1987-1988,†Canadian Journal of Economics, 34, 345–376.
Baldwin, R., and J. Harrigan (2007): “Zeros, Quality and Space: Trade Theory and Trade Evidence,†NBER Working Paper No. 13214.
Bernard, A. B., J. B. Jensen, S. J. Redding, and P. K. Schott (2007): “Firms in International Trade,†Journal of Economic Perspectives, 21(3), 105–130.
Bernard, A. B., J. Eaton, J. B. Jensen, and S. Kortum (2003): “Plants and Productivity in International Trade,†American Economic Review, 93(4), 1268–1290.
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Brainard, S. L. (1997): “An Empirical Assessment of the Proximity-Concentration Trade-off between Multinational Sales and Trade,†American Economic Review, 87(4), 520 – 544.
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Clerides, S., S. Lach, and J. Tybout (1998): “Is Learning by Exporting Important? Micro-Dynamic Evidence from Colombia, Mexico and Morocco,†Quarterly Journal of Economics, 113, 903–947.
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- DANE (2004): “MetodologıÌÂa de la Encuesta Anual Manufacturera,†Technical document, Departamento Administrativo Nacional de EstadıÌÂstica, Dec.
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de Loecker, J. (2007): “Product Differentiation, Multi-Product Firms, and Estimating the Impact of Trade Liberalization on Productivity,†NBER Working Paper No. 13155.
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- Eaton, J., M. Eslava, M. Kugler, and J. Tybout (2007): “The Margins of Entry into Export Markets: Evidence from Colombia,†Unpub. paper, NYU.
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Eslava, M., J. Haltiwanger, A. Kugler, and M. Kugler (2004): “The Effects of Structural Reforms on Productivity and Profitability Enhancing Reallocation: Evidence from Colombia,†Journal of Development Economics, 75, 333–371.
- FarneÃŒÂ, S. (2004): “Boletin del Observatorio del Mercado de Trabajo y la Seguridad Social No. 7,†Universidad Externado de Colombia.
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Foster, L., J. Haltiwanger, and C. Syverson (2008): “Reallocation, Firm Turnover and Efficiency: Selection on Productivity or Profitability?,†American Economic Review, 98(1), 394–425.
Goldberg, P. K., and F. Verboven (2001): “The Evolution of Price Dispersion in the European Car Market,†Review of Economic Studies, 68(4), 811 – 848.
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- Hallak, J. C., and J. Sivadasan (2008): “Productivity, Quality and Exporting Behavior under Minimum Quality Requirements,†Unpub. paper, University of Michigan.
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- Hallak, J. C., and P. Schott (2005): “Estimating Cross-Country Differences in Product Quality,†Unpub. Paper, Yale University.
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Halpern, L., and M. Koren (2007): “Pricing to Firm: An Analysis of Firm- and Product-Level Import Prices,†Review of International Economics, 15(3), 574–591.
Hausmann, R., J. Hwang, and D. Rodrik (2007): “What You Export Matters,†Journal of Economic Growth, 12(1), 1–25.
- Helpman, E., M. J. Melitz, and S. R. Yeaple (2004): “Export versus FDI with Heterogenous Firms,†American Economic Review, 94(1), 300–316.
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- Hortaçsu, A., and C. Syverson (2007): “Cementing Relationships: Vertical Integration, Foreclosure, Productivity, and Prices,†Journal of Political Economy, 115(2), 250–301.
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Hummels, D., and A. Skiba (2004): “Shipping the Good Apples Out? An Empirical Confirmation of the Alchian-Allen Conjecture,†Journal of Political Economy, 112(6), 1384–1402.
- Hummels, D., and P. J. Klenow (2005): “The Variety and Quality of a Nation’s Exports,†American Economic Review, 95(3), 704–723.
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- Iacovone, L., and B. Javorcik (2008): “Getting Ready: Preparing to Export,†Unpub. paper, Oxford University.
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- Input unit value: Value consumed of 8-digit product, divided by number of physical units of product consumed. Consumption is purchases minus net intra-firm transfers minus net increase in inventories. We also refer to the input unit value (somewhat loosely, since it represents an average) as the input price. In 1998 Colombian pesos.
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- Johnson, R. C. (2007): “Trade and Prices with Heterogeneous Firms,†Unpub. paper, UC Berkeley.
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- Jones, C. I. (2007): “Intermediate Goods, Weak Links, and Superstars: A Theory of Economic Development, †Unpub. paper, UC Berkeley.
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- Katayama, H., S. Lu, and J. R. Tybout (2006): “Firm-Level Productivity Studies: Illusions and a Solution,†Unpub. paper, The University of Sydney, Charles River Associates and Pennsylvania State University.
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Khandelwal, A. (2007): “The Long and Short (of) Quality Ladders,†Unpub. paper, Yale University.
Kremer, M. (1993): “The O-Ring Theory of Economic Development,†Quarterly Journal of Economics, 108(3), 551–575.
Lucas, R. (1978): “On the Size Distribution of Business Firms,†Bell Journal of Economics, 9(2), 508–523.
- Melitz, M. (2000): “Estimating Firm-level Productivity in Differentiated Product Industries,†Unpub. paper, Harvard University.
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Melitz, M. J., and G. I. P. Ottaviano (2008): “Market Size, Trade, and Productivity,†Review of Economic Studies, 75(1), 295 – 316.
- Mobarak, A. M., and D. P. Purbasari (2006): “Corrupt Protection for Sale to Firms: Evidence from Indonesia,†Unpub. paper, University of Colorado.
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- Modified Gollop-Monahan measure of differentiation: Following Bernard and Jensen (2007), we use just the “dissimilarity†component of the full Gollop and Monahan (1991) index. We define the index as follows: GMk =  X j,t |sijkt − sik|   where i, j, k, and t index products, plants, 5-digit industries and years; sijkt is the expenditure share of plant j in industry k on input i in year t; and sik is the average expenditure share on input i by all plants in industry k in all years.59 Herfindahl index (of purchasers): Sum of squares of expenditure shares of purchasers of the corresponding 8-digit input, where the expenditure share is the expenditure by a given purchaser as a share of total expenditures on the good. Herfindahl index (of suppliers): Sum of squares of market shares of producers of the corresponding 8-digit input. Purchaser share: Expenditures on product by plant as a share of total expenditures on product by all plants in a given year.
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- Now suppose that the above equations refer to goods measured in quality units, which we call “utilsâ€Â. Suppose further that higher-Õ plants, in addition to requiring fewer units of inputs to produce one util of output, also produce goods with more utils per physical unit, where utils per physical unit are given by: q̃(Õ) = Õ (A12) The existence of a relationship of this kind is alluded to in Melitz (2003, p. 1699) but not explicitly specified. Given (A12), price and quantity in physical units are given by: p̃∗ O(Õ) = p∗ O(Õ) q̃(Õ) = à à − 1 Õ−1 (A13) x̃∗ (Õ) = x∗(Õ) q̃(Õ) = à à − 1 −à XPà ÕÃ− (A14) The expression for revenues is unchanged by the redefinition of units.
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Oi, W. Y., and T. L. Idson (1999): “Firm Size and Wages,†in Handbook of Labor Economics. Volume 3B, ed. by O. Ashenfelter, and D. Card, pp. 2165 – 2214. Elsevier, Amsterdam.
- Rauch (1999) measure of horizontal differentiation: SITC 4-digit sectors classified by Rauch’s “liberal†classification as “homogeneous†or “reference-priced†are assigned 0, others are assigned 1. SITC 4-digit industries were then converted to ISIC rev. 2 4-digit using concordance from OECD, which generated some fractional values.
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Rauch, J. E. (1999): “Networks versus Markets in International Trade,†Journal of International Economics, 48, 7–35.
Roberts, M. J., and D. Supina (1996): “Output Price, Markups, and Producer Size,†European Economic Review, 40(3-5), 909–921.
Roberts, M. J., and J. R. Tybout (1997): “The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs,†American Economic Review, 87(4), 545–564.
Rodrik, D. (1994): “Industrial Organization and Product Quality: Evidence from South Korean and Taiwanese Exports,†in Empirical Studies of Strategic Trade Policy, ed. by P. Krugman, and A. Smith, pp. 195 – 210. University of Chicago Press (for NBER), Chicago.
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Schott, P. (2004): “Across-Product versus Within-Product Specialization in International Trade,†Quarterly Journal of Economics, 119(2), 647–678.
- Several remarks are in order. First, if > 1, then both output price in physical units and revenues are increasing in Õ and hence are positively correlated with one another. Note also that setting = 1 yields a model in which higher Õ corresponds to higher quality but marginal cost and hence output price in physical units are constant, as alluded to by Melitz (2003, p. 1699).
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Shaked, A., and J. Sutton (1982): “Relaxing Price Competition through Product Differentiation,†Review of Economic Studies, 49, 3–13.
- Sutton, J. (1991): Sunk Costs and Market Structure: Price Competition, Advertising, and the Evolution of Concentration. MIT Press, Cambridge, Mass.
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- Syverson, C. (2004a): “Market Structure and Productivity: A Concrete Example,†Journal of Political Economy, 112(6), 1181–1233.
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- Total output: Total value of output of all products, valued at factory price. Total output is sales plus net transfers to other plants in same firm plus net increases in inventories. In billions of 1998 Colombian pesos. Employment: The number of permanent, paid employees. Exporter: Indicator variable taking the value 1 if plant has export sales > 0, and 0 otherwise. Export share: Export sales as a fraction of total sales.
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- Tybout, J. (2003): “Plant- and Firm-Level Evidence on the ‘New’ Trade Theories,†in Handbook of International Trade, ed. by E. K. Choi, and J. Harrigan. Basil Blackwell, Oxford.
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- Verhoogen, E. A. (2004): “Trade, Quality Upgrading and Wage Inequality in the Mexican Manufacturing Sector: Theory and Evidence from an Exchange-Rate Shock,†Center for Labor Economics, UC Berkeley, Working Paper No. 67, January.
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