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Does Export Openness Increase Firm-level Output Volatility?

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Author Info

  • Claudia M. Buch
  • Jörg Döpke
  • Harald Strotmann

Abstract

Abstract There is a widespread concern that increased trade may lead to increased instability and thus risk at the firm level. Greater export openness can indeed affect firm-level volatility by changing the exposure and the reaction of firms to macroeconomic developments. The net effect is ambiguous from a theoretical point of view. This paper provides firm-level evidence on the link between openness and volatility. Using comprehensive data on more than 21,000 German manufacturing firms for the period 1980-2001, we analyse the evolution of firm-level output volatility and the link between volatility and export openness. Our paper has three main findings. First, firm-level output volatility is significantly higher than the level of aggregate volatility, but it displays similar patterns. Second, increased export openness lowers firm-level output volatility. This effect is primarily driven by variations along the extensive margin, i.e. by the distinction between exporters and non-exporters. Variations along the intensive margin, i.e. the volume of exports, tend to have a dampening impact on volatility as well. Third, small firms are more volatile than large firms. Copyright 2009 The Authors. Journal compilation 2009 Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal World Economy.

Volume (Year): 32 (2009)
Issue (Month): 4 (04)
Pages: 531-551

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Handle: RePEc:bla:worlde:v:32:y:2009:i:4:p:531-551

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0378-5920

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Cited by:
  1. Maria Garcia-Vega & Alessandra Guariglia, . "Volatility, Financial Constraints and Trade," Discussion Papers 08/04, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
  2. Christopher Kurz & Mine Z. Senses, 2013. "Importing, exporting and firm-level employment volatility," Finance and Economics Discussion Series 2013-44, Board of Governors of the Federal Reserve System (U.S.).
  3. Christopher Kurz & Mine Z. Senses, 2013. "Importing, Exporting And Firm-Level Employment Volatility," Working Papers 13-31, Center for Economic Studies, U.S. Census Bureau.
  4. Luciana Juvenal & Paulo Santos Monteiro, 2013. "Export market diversification and productivity improvements: theory and evidence from Argentinean firms," Working Papers 2013-015, Federal Reserve Bank of St. Louis.
  5. MATSUURA Toshiyuki, 2013. "Why Did Manufacturing Firms Increase the Number of Non-regular Workers in the 2000s? Does international trade matter?," Discussion papers 13036, Research Institute of Economy, Trade and Industry (RIETI).
  6. Vannoorenberghe, G., 2012. "Firm-level volatility and exports," Journal of International Economics, Elsevier, vol. 86(1), pages 57-67.
  7. Tanaka, Ayumu, 2013. "The causal effects of exporting on domestic workers: A firm-level analysis using Japanese data," Japan and the World Economy, Elsevier, vol. 28(C), pages 13-23.

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