Firms in International Markets

The thesis consists in three essays that investigate the behaviour and role of firms in international markets. The first Chapter of the thesis is an extension of Iodice and Tomasi (2016). This work investigates the evolution of the employment and wage structure of Italian manufacturing firms in the early 2000s. In particular, we perform a decomposition analysis and break down the variation in the skilled-wage bill ratio into employment and wage movements. Our technique disentangles aforementioned structure into inter-and-intra-sector shifts, and between or within firms. We provide a methodological framework that simultaneously takes into account changes in the skill intensity and the wage gap. The results suggest that most of the changes are reported within firms, where one observes a skill-upgrading effect not followed by a price adjustment. The increase in the relative employment of skilled workers and the decrease in the wage gap between high- skilled and low-skilled workers can be substantially attributed to changes within exporters and importers, and in more productive firms. Finally, the paper further accounts for changes in the hourly wage premium and skill intensity, and it shows that the annual wage gap is induced by a substantial fall in the hourly wage premium and by an increase in the numbers of hours worked by the skilled factor. The second chapter builds on a joint work with Lionel Fontagné and Angelo Secchi. We describe an industry (in an origin country) where an aggregate relationship, the set of products exported towards a destination country by an industry, is viewed as the outcome of decisions made by a finite group of heterogeneous firms. We show that the relation between the aggregate and firm level diversification is mediated by the extent to which firms product sets overlap. In particular, we show that the average number of product overlaps per firm can be conveniently decomposed into three factors: the normalized number of firms exporting, the average number of products of firms - computed excluding the most diversified firm and an index of product sets similarity. We use a sample of French exporters between 1995-2011 and compute the contribution of these three components to the variation in the number of overlaps per firms across destinations and industries. Product set similarity account for half of the variation. The distribution of the average product scope across industry-destination is found to be significantly affected by the removal of the most diversified firm. We compute the RCAs of French industries with and without the top exporter and we find that a 10\% increase in the product set similarity index is associated to a reduction of 3.4\% in the probability of loosing the RCA due to the removal of the largest exporter. We interpret this evidence suggesting that the similarity of firms’ product sets reflects the extent to which the aggregate performance of the industry are driven by fundamental rather than firm-specific forces. The third chapter investigates the protective nature of newly introduced technical regulations that are not properly disclosed at the international level. We begin by building a novel database which identifies the process of adoption of those Technical Barriers to Trade (TBTs) that have been contested to the WTO through a Specific Trade Concern (STC). We then cross-reference this database with a firm-level panel of French exporters and we carry out an event study. We find that in more than 1/3 of the studied cases, countries have adopted the underlying regulations without previously announcing the change to other members. In these cases, the new regulation hampers exporters by causing a temporary halt of their activity. This stop lasts from one to two semesters, and it is shorter in the case the content of the new TBT is eventually disclosed by governments. While large firms are able to wait until more information is available, small firms exit the market. We interpret this evidence as suggesting that countries can effectively hinder foreign competitors by raising the uncertainty about the profitability of the market. This in turn raises firms real option to delay their investment decision on whether to export there.