Last week a public research seminar was held at the National Bank of Ukraine. During this seminar, Mr Sergii Meleshchuk, PhD Student at UC Berkeley, presented the findings of the paper on "The Intensive Margin in Trade: Moving Beyond Pareto". 

The research was conducted jointly with Ms Ana M. Fernandes, Senior Economist  at the World Bank,  Mr Peter J. Klenow, Professor at Stanford University, Ms Martha Denisse Pierola, Senior Economist in the Integration and Trade Sector of the Inter-American Development Bank, and  Mr Andres Rodrıguez-Clare,  Professor at the University of California (UC) Berkeley. 

In their research, the authors investigate the role of  the intensive margin  in  driving the variation in exports across trading partners. The canonical Melitz model of trade with Pareto-distributed firm productivities predicts that all variation in exports across trade partners should occur  through the number of exporters – the extensive margin.   However, based on data  that cover firm-level exports from 50  countries, the authors found that average exports per exporter account for about 40 percent  of the variation in overall exports across various exporting firms. In other words, about 40 percent of variation in exports occurs along the intensive  margin.

The authors argue that any model used  to analyze firm-level exports in the context of international trade shall be able to  reproduce significant intensive margin. The authors have put forward a hypothesis that can be applied to measure the intensive margin and  established some correlations that are inconsistent with the canonical trade model. Mr Meleshchuk is confident that findings revealed in this paper may be useful for researchers, as well as monetary policy and trade policy makers seeking to quantify the impact of exchange rate movements and changes in customs duty rates  on exports.

Please follow the link to view the research paper.

The video of the seminar is available at link.

With the aim of arranging further research seminars, we encourage potential contributors to collaborate with us and present the findings of their research studies on issues related to the NBU’s activities   and the financial system’s operation. Proposals (with an indication of a suitable date for the seminar to take place,  and attached presentation materials, an executive summary and/or draft contributions) should be sent to the Research Division of the Monetary Policy and Economic Analysis   Department  for consideration via e-mail to: [email protected], [email protected]).