THE DYNAMIC EFFECTS OF MULTILATERAL TRADE POLICY WITH EXPORT CHURNING

This article examines the relationship between export churning and the aggregate response to trade policy. I show that export churning-the share of bilateral exports by new or exiting exporters-varies systematically across export destinations and build a multicountry model with destination-specific investments in exporting capacity that is consistent with churning patterns. The model then predicts that trade liberalizations with minor export destinations deliver higher bilateral export growth than liberalizations with major export destinations, and the data support this prediction. Furthermore, the aggregate effects of trade policy depend critically on the pattern of export churning in the model.