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Firm-level volatility and exports

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  • Vannoorenberghe, G.

Abstract

This paper shows that the share of exports in the total sales of a firm has a positive and substantial impact on the volatility of its sales. Decomposing the volatility of sales of exporters between their domestic and export markets, I show using an identification strategy based on a firm-specific geographical instrument that firms with a larger export share have more volatile domestic sales and less volatile exports. These empirical patterns can be explained using a model in which firms face market-specific shocks and short-run convex costs of production. In such a framework, firms react to a shock in one market by adjusting their sales in the other market. I point to strong evidence that output variations on the domestic and export market are negatively correlated at the firm level. This result casts doubts on the standard hypothesis that firms face constant marginal costs and maximize profits on their different markets independently of each other. Furthermore, it points to the caveat that sales volatility on a particular market only gives limited information about the size of shocks on that market.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 86 (2012)
Issue (Month): 1 ()
Pages: 57-67

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Handle: RePEc:eee:inecon:v:86:y:2012:i:1:p:57-67

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Web page: http://www.elsevier.com/locate/inca/505552

Related research

Keywords: Firm-level volatility; Trade openness; Cost convexity;

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References

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Citations

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Cited by:
  1. Berman, N. & Berthou, A. & Héricourt, J., 2012. "Export dynamics and sales at home," Working papers 408, Banque de France.
  2. Lichter, Andreas & Peichl, Andreas & Siegloch, Sebastian, 2013. "Exporting and Labor Demand: Micro-Level Evidence from Germany," IZA Discussion Papers 7494, Institute for the Study of Labor (IZA).
  3. Volker Ziemann, 2013. "Do Structural Policies Affect Macroeconomic Stability?," OECD Economics Department Working Papers 1075, OECD Publishing.
  4. Alejandro Riaño, 2011. "Exports, Investment and Firm-Level Sales Volatility," CESifo Working Paper Series 3319, CESifo Group Munich.
  5. Ansgar Belke & Anne Oeking & Ralph Setzer, 2013. "Exports and Capacity Constraints – A Smooth Transition Regression Model for Six Euro Area Countries," Ruhr Economic Papers 0449, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  6. 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.
  7. Paulo Soares Esteves & António Rua, 2013. "Is there a role for domestic demand pressure on export performance?," Working Papers w201303, Banco de Portugal, Economics and Research Department.
  8. JaeBin Ahn & Alexander McQuoid, 2013. "Capacity Constrained Exporters: Micro Evidence and Macro Implications," Working Papers 1301, Florida International University, Department of Economics.
  9. Soares Esteves, Paulo & Rua, António, 2013. "Is there a role for domestic demand pressure on export performance?," Working Paper Series 1594, European Central Bank.
  10. 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.).

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