Essays in international trade and firm behaviour

The literature on international trade has witnessed a dramatic change over last two decades where the issues of firm-level heterogeneity has emerged as a core topic. The theoretical framework underpinning the way we understand firms’ engagement in international trade has been essentially encouraged by the seminal studies of Melitz (2003) and Bernard et al. (2003) while, the micro econometrics was pioneered by Bernard et al. (1995), Aw and Hwang (1995) and Roberts and Tybout (1997). Motivated by this substantial and on-going literature, this thesis examines the behaviour of firms in international trade for Turkey. Turkey is an emerging economy with a substantial reliance on the international markets both as a source and an outlet for its domestic economic activities. Over the last decade it has greatly increased its integration into the globalized world economy transforming itself into one of the major recipients of foreign direct investment. In this respect, this thesis adds to the literature with three separate self-contained empirical essays utilizing firm-level data from Turkish manufacturing and services industries. The first essay concentrates on self-selection into trade by exporting and importing firms, and on the presence of differential sunk costs between exporters and importers across different categories of exports and imports. The second essay explores the differentials in the postentry effects of exporting to world markets with different income levels. Controlling for the quality of exports, the chapter examines the extent to which the post-entry effects on the productivity of firms are driven by changes in physical productivity, as opposed to quality/price mark-up effects. The third essay investigates the existence and extent of export spillovers that arise from buyer-supplier relations between domestic and foreign firms; within manufacturing industry and between manufacturing and services industries.