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Entry Costs and Increasing Trade

By William Lincoln and Andrew McCallum

Abstract

Using confidential microdata from the US Census, we find that the fraction of manufacturing plants that export rose from 21% in 1987 to 39% in 2006. It has been suggested that similar trends in other countries may have been caused by declining costs of entering foreign markets. Our study tests this hypothesis for the first time. Both reduced form and structural estimation approaches find little evidence that the entry costs declined significantly in the US over this period. We instead argue that changes in other factors that determine export status are sufficient to explain these trends.

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