Mehmet Fatih Ulu Ph.D Candidate in Economics

Heterogeneity and Uncertainty in the Dynamics of Firm Selection into Foreign Markets (Job Market Paper)

Using firm-level data from Turkish manufacturing firms, I find that firms remain in the markets in which they have already been selling their products. Also, they do not export to a common set of destination which violates a common entry cost assumption. Unlike the general equilibrium studies of trade, I study a partial equilibrium analysis to explain an entry-cost-reducing effect of previous presence in a market, and increasing returns to being in more markets. Then, I undertake an empirical analysis and find significant benefits to being in a market in the previous period on continued selection into the same market, and synergetic benefits to being in more market on entry costs and demand across different markets. Quantifying these impacts in a model which accounts for other possible shocks to productivity, demand and entry costs is important because they can provide a rationale for the existing export subsidies by showing why a firm's status in a market can be persistent after the first entry into that market. Also, my empirical strategy allows me to separate firm-specific and market-specific heterogeneity from idiosyncratic uncertainty in firms' selection problem, and I find that 1) as the technological requirements of sectoral production increase the share of idiosyncratic components weakens in the total variation of revenues, and instead the share of firm-specific heterogeneity increases, 2) the relative importance of idiosyncratic components diminishes as the level of per capita income of a destination market increases.

Intermediate Goods, Productivity and Value Added Content of Exports (Work in Progress)

This paper analyzes the interaction between productivity, imported intermediate inputs, and exports behavior of heterogeneous firms. The data that we have about Turkish manufacturing firms exhibit some patterns about these interactions which are: 1) Intermediate goods import ratio (value of imported intermediate imports/total intermediate input purchases) is higher for exporter firms than non-exporter firms at all sizes, 2) the share of imported intermediate varieties grows faster with size for exporters than for non-exporters, 3) fewer firms import a greater variety of intermediate goods. Assuming fixed costs for both importing and exporting, the heterogeneous firms model of this paper investigates the mentioned regularities, and produces parameter estimates by targeting the moments of the Turkish data.