Margins of Trade: Czech Firms During
and After the Crisis
Kamil Galuščák, Ivan Sutóris
Czech Economic Society, 9th Biennial Conference
Prague, 26 November 2016
The views expressed are those of the authors and do not necessarily reflect the views of
the Czech National Bank.
Motivation and what we do
• The extensive margin of trade attenuates terms of trade
changes due to current account imbalances
• High fragmentation of production changes the
transmission of shocks
• Using international trade data by firm, products and
destinations, we investigate intensive and extensive
margins of Czech exports before, during and after the
crisis
• We provide some evidence on the impact of firms’
participation in „global value chains“
2
Previous literature
• Bernard et al. (2009) explore the role of intensive and
extensive margins using US data: extensive margins
explain most of the variation in trade flows
• Amador and Opromolla (2013) find both margins are
important to explain variation of Portuguese exports
• Altomonte et al. (2012) analyse the performance of
„global value chains“ during the trade collapse using
transaction-level dataset on French firms
• Intra-group trade in intermediates was characterised by a
faster drop followed by a faster recovery than arm’s length
trade
• Confirm the existence of „bullwhip effect“ (amplified
fluctuations due to the adjustment of inventories within the
supply chains)
3
Methodology
• We define mid-point growth rates:
𝑔𝑔𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖
𝑥𝑥𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 − 𝑥𝑥𝑖𝑖𝑖𝑖𝑖𝑖(𝑡𝑡−4)
=
1
(𝑥𝑥 +𝑥𝑥
)
2 𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 𝑖𝑖𝑖𝑖𝑖𝑖(𝑡𝑡−4)
• and weights as the relative share of export flow:
𝑤𝑤𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖
𝑥𝑥𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 + 𝑥𝑥𝑖𝑖𝑖𝑖𝑖𝑖(𝑡𝑡−4)
=
∑𝑐𝑐 ∑𝑖𝑖 ∑𝑘𝑘 𝑥𝑥𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 + ∑𝑐𝑐 ∑𝑖𝑖 ∑𝑘𝑘 𝑥𝑥𝑖𝑖𝑖𝑖𝑖𝑖(𝑡𝑡−4)
• Total value of exports is a weighted sum of elementary
flows:
𝐺𝐺𝑡𝑡 = � � � 𝑔𝑔𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 𝑤𝑤𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖
𝑐𝑐
𝑖𝑖
𝑘𝑘
4
Methodology
• Following Bricongne et al. (2012), we aggregate flows
into several categories:
•
•
•
•
Firm extensive margin
Country extensive margin
Product extensive margin
Intensive margin (residual)
• Year-on-year growth rates remove seasonality
• Berthou and Vicard (2013) discuss the aggregation bias
5
Methodology
• Next, we apply a shift-share decomposition to investigate
how exports evolved along several dimensions:
• Destinations
• Product groups (SNA classification: capital, intermediate,
consumption goods)
• Firm size (percentiles of export distribution by product
sectors)
• Import intensity of exports (proxy for GVC)
6
Methodology
• We estimate a weighted regression (weights wi)
𝑁𝑁𝑑𝑑
𝑁𝑁𝑝𝑝
𝑁𝑁𝑠𝑠
𝑗𝑗=1
𝑗𝑗=1
𝑗𝑗=1
𝑔𝑔𝑖𝑖 = 𝛼𝛼 + � 𝛽𝛽𝑗𝑗 ∙ 𝕀𝕀[𝑑𝑑𝑖𝑖 = 𝑗𝑗] + � 𝛾𝛾𝑗𝑗 ∙ 𝕀𝕀[𝑝𝑝𝑖𝑖 = 𝑗𝑗] + � 𝛿𝛿𝑗𝑗 ∙ 𝕀𝕀[𝑠𝑠𝑖𝑖 = 𝑗𝑗] + ⋯ + 𝜖𝜖𝑖𝑖
• The weighted sum equals zero:
𝑁𝑁
𝑁𝑁𝑠𝑠
𝑝𝑝
𝑝𝑝
𝑑𝑑
𝑠𝑠
𝑑𝑑
∑𝑁𝑁
∑
∑
𝑤𝑤
∙
𝛽𝛽
=
0,
𝑤𝑤
∙
𝛾𝛾
=
0,
𝑤𝑤
∙ 𝛿𝛿𝑗𝑗 = 0, …
𝑗𝑗
𝑗𝑗
𝑗𝑗
𝑗𝑗
𝑗𝑗=1
𝑗𝑗=1
𝑗𝑗=1 𝑗𝑗
• Coefficient estimates represent relative contributions within the
groups
7
Data
• We use quarterly datasets on exports and imports by
Czech firm-product-destinations in 2005-2014
• Products used in HS6 classification
• We apply correspondence tables to account for revisions
in the HS classification
• We define HS2 product groups
• We aggregate the HS6 groups into main SNA classes:
capital, intermediate, consumption goods (the rest:
passenger motor cars, motor spirit, goods not elsewhere
specified)
• Destination: Germany, Slovakia, Poland, rest of the euroarea, other EU countries, rest of the world
8
Data
Figure 1: Total value of exports and total number of exporters
9
Data
Table 1: Key macroeconomic indicators (year-on-year changes in %)
GDP*
Exports of goods
and services*
Imports of goods
and services*
Industrial
production*
Consumer Price
Index
Note: * real terms
2005
6.8
2006
7.1
2007
5.5
2008
2.5
2009
-4.7
2010
2.1
2011
2.0
2012
-0.8
2013
-0.5
2014
2.0
11.9
14.8
11.0
3.8
-9.5
14.4
9.3
4.5
0.0
8.9
6.1
11.9
12.8
2.8
-10.7
14.5
6.7
2.8
0.1
9.9
3.9
8.3
10.6
-1.8
-13.6
8.6
5.9
-0.8
-0.1
5.0
1.9
2.5
2.8
6.4
1.1
1.5
1.9
3.3
1.4
0.4
10
Data
Figure A1: Exports by destinations (millions CZK)
Figure A2: Exports by main SNA categories (millions CZK)
11
Results
Figure 4: Contributions of net margins to mid-point growth rates
• Intensive margin explains most of the aggregate export
growth
• The extensive margin is smaller, but not negligible
• Exporting firms absorbed the negative shock in 2008 first
through the intensive margin
12
Results
Table 2: Contributions to mid-point growth rates (using quarterly and yearly data)
2006-2007
Quarter
2008-2009
Year
Quarter
0-80 99-100 Total Total 0-80 99-100 Total
Net Firm
0.2
1.5
3.1
2.2
0.0
2.2
2010-2014
Year
2.9
Quarter
Total
0-80
2.3
0.1
Year
99-100 Total Total
0.7
2.0
1.2
Firm Entry
0.6
2.5
6.4
3.7
0.4
3.3
6.4
4.2
0.5
1.7
5.6
3.3
Firm Exit
-0.3
-1.0
-3.3
-1.5
-0.4
-1.1
-3.5
-1.9
-0.4
-1.0
-3.5
-2.1
Net Country
0.1
0.3
1.4
0.5
0.0
-0.5
-0.9
-0.9
0.1
-0.1
0.1
-0.2
Country Entry
0.4
1.7
5.6
2.7
0.4
2.2
5.2
2.9
0.3
1.3
4.5
2.4
Country Exit
-0.3
-1.4
-4.2
-2.3
-0.4
-2.7
-6.1
-3.8
-0.3
-1.4
-4.5
-2.5
0.1
0.4
0.9
1.0
0.0
-0.1
-0.4
-0.2
0.1
0.6
0.9
0.5
Net Product
Product Entry
0.6
2.2
6.4
4.4
0.5
1.7
4.8
3.1
0.5
2.0
5.6
3.6
Product Exit
-0.5
-1.8
-5.6
-3.4
-0.6
-1.7
-5.2
-3.3
-0.4
-1.4
-4.7
-3.1
Net Extensive
0.4
2.2
5.4
3.7
0.0
1.6
1.6
1.2
0.2
1.2
3.0
1.5
Net Intensive
-0.4
8.1
8.2
9.8
-1.0
-0.5
-8.1
-8.0
-0.4
7.7
7.3
8.8
Intensive Positive
0.7
14.6
25.4
26.1
0.6
10.8
17.5
16.7
0.7
15.0
24.8
24.4
Intensive Negative
-1.1
-6.5
-17.1 -16.2
-1.5
-11.3
-25.6
-24.8
-1.1
-7.4
-17.5 -15.7
Total
0.0
10.3 13.6 13.5 -1.0
1.1
-6.5
-6.9
-0.2
8.8
10.3 10.2
Note: Margins are calculated using quarterly data (quarter) and yearly data (year). For quarterly data, the first
two columns show margins calculated for small firms up to the 80 percentile and for the top 1% of exporters.
Firm size is based on ranking by export value and HS2 product group in each period.
• The net extensive margins explains 27% to 40% of exports
in 2006-2007 and 15% to 29% in 2010-2014
• Net country margin: negative in 2008-2009 and zero
afterwards
• Net product margin returned to positive values since 2010
• The contribution of small firms was zero in 2006-2007 and
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negative since then
Results
Figure 5: Decomposition of export growth rates
(i)
destinations
RoEA
-.1
-.15
-.2
-.1
-.1
0
-.05
0
.1
0
.1
.05
PL
.2
DE
2006q1
2008q1
2010q1
2012q1
2006q1
2014q1
2008q1
2010q1
2012q1
2012q1
2014q1
2012q1
2014q1
2012q1
2014q1
.1
.05
0
.05
-.05
0
-.1
-.05
-.1
2010q1
2010q1
SK
.1
.2
0
-.2
2008q1
2008q1
RoW
RoEU
2006q1
2006q1
2014q1
2006q1
2008q1
2010q1
2012q1
2014q1
2006q1
2008q1
2010q1
quart
Graphs by destination
• Drop in 2008-2009: PL, other EU countries
• Exports to RoW higher during and after the crisis
14
Results
(i)
SNA product groups
Intermediate goods
.1
.2
Consumption goods
-.1
-.1
-.1
0
-.05
0
0
.1
.05
Capital goods
2006q1
2008q1
2010q1
2012q1
2014q1
2006q1
2010q1
2012q1
2014q1
Passenger motor cars
2006q1
2008q1
2010q1
2012q1
2014q1
1
Goods not elsewhere specified
2006q1
2008q1
2010q1
2012q1
2014q1
0
-.5
-.2
-1
-.5
0
0
.5
.2
.5
1
.4
Motor spirit
2008q1
2006q1
2008q1
2010q1
2012q1
2014q1
2006q1
2008q1
2010q1
2012q1
2014q1
quart
Graphs by product category (SNA)
• Drop in 2008-2009: intermediate goods, exports in capital
goods started to decline already in early 2008
• Exports in consumtion goods less sensitive to the cycle
15
Results
(i)
firm size
Size 80-95
-.02 0
.02 .04 .06
-.25 -.2 -.15 -.1 -.05
Size 0-80
2006q1
2008q1
2010q1
2012q1
2014q1
2006q1
2008q1
2012q1
2014q1
Size 99-100
0
.05
.05
.1
.1
.15
.2
.15
Size 95-99
2010q1
2006q1
2008q1
2010q1
2012q1
2014q1
2006q1
2008q1
2010q1
2012q1
2014q1
quart
Graphs by firm size
• Contribution of small firms is on the decline
• Robustness check: exclude below-the-threshold exports
16
Results
• Import share of exports (proxy for GVC participation)
• Import intensive exporting firms have been more negatively
affected by the crisis
17
Results
-.3
-.2
-.1
0
.1
intercept (average effect)
2006q3
2008q3
2010q3
quart
2012q3
2014q3
• Intercept: unconditional mean capturing the average
impact
18
Conclusions
• Extensive margin lower after the crisis: sensitivity of
firms’ exports to relative price changes may have
increased
• The country extensive margin did not recover after the
crisis (more firms losing destinations than acquiring
new ones)
• All margins are dominated by large firms
• The contribution of small firms is on decline
• Exports of firms integrated into „global value chains“
may have been hit harder during the crisis and
recovered later than less integrated firms
19
Conclusions
• Caveats and extensions:
• Define exporting firms as the ability to enter and remain
on markets (we neglect the dynamics of exporters)
• Interpret positive firm margin observed throughout the
period (changes in firm id’s due to organisational
changes?)
• Explore the trade in intermediate goods which may be
concentrated among small firms and may exhibit
different pattern of adjustment
• Explore how small firms thrive on international markets
and how they grow and move downstream along the
production chain
20
Thank you for your attention
www.cnb.cz
Kamil Galuščák
[email protected]
21