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Marginal Distance: Does Export Experience Reduce Firm Trade Costs?

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  • Martina Lawless

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Abstract

Are the costs of exporting to a market reduced if a firm has experience of exporting to a neighbouring market? If so, does this effect operate through reducing entry barriers or by increasing sales once the firm is operating in the market? This paper examines linkages between current export destinations and entry, sales and exit for new markets. We find that measures of exporting experience in geographically nearby markets increase the probability of entry into a market and reduce the probability of exit. However, these same measures have very limited effect on the firm’s export sales in the market. The effect of related experience on sales tends to be negative for recently entered firms. We interpret this result in the context of the Melitz heterogeneous-firm model of trade by showing that lower fixed costs reduce the entry threshold, but this lower threshold has the effect of allowing lower-sales marginal firms to be present in the market. Copyright Springer Science+Business Media New York 2013

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Bibliographic Info

Article provided by Springer in its journal Open Economies Review.

Volume (Year): 24 (2013)
Issue (Month): 5 (November)
Pages: 819-841

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Handle: RePEc:kap:openec:v:24:y:2013:i:5:p:819-841

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Web page: http://www.springerlink.com/link.asp?id=100323

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Keywords: Distance; Export performance; Heterogeneous firms; F10;

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References

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  1. Lawless, Martina, 2007. "Firm Export Dynamics and the Geography of Trade," Research Technical Papers 2/RT/07, Central Bank of Ireland.
  2. Lawless, Martina, 2008. "Deconstructing Gravity: Trade Costs and Extensive and Intensive Margins," MPRA Paper 10230, University Library of Munich, Germany.
  3. Facundo Albornoz & Hector F. Calvo Pardo & Gregory Corcos & Emanuel Ornelas, 2010. "Sequential Exporting," Discussion Papers 10-08, Department of Economics, University of Birmingham.
  4. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
  5. Richard Fabling & Arthur Grimes & Lynda Sanderson, 2011. "Whatever next? Export market choices of New Zealand firms," ERSA conference papers ersa10p367, European Regional Science Association.
  6. Brian Aitken & Gordon H. Hanson & Ann E. Harrison, 1994. "Spillovers, Foreign Investment, and Export Behavior," NBER Working Papers 4967, National Bureau of Economic Research, Inc.
  7. Lawless, Martina & Whelan, Karl, 2008. "Where do Firms Export, How Much and Why?," Research Technical Papers 6/RT/08, Central Bank of Ireland.
  8. Mayer, Thierry & Zignago, Soledad, 2006. "Notes on CEPII’s distances measures," MPRA Paper 26469, University Library of Munich, Germany.
  9. Anne-Celia Disdier & Keith Head, 2008. "The puzzling persistence of the distance effect on bilateral trade," Working Papers 21709, Institut National de la Recherche Agronomique, France.
  10. Rubinstein, Yona & Helpman, Elhanan & Melitz, Marc, 2008. "Estimating Trade Flows: Trading Partners and Trading Volumes," Scholarly Articles 3228230, Harvard University Department of Economics.
  11. Bruce A. Blonigen & Ronald B. Davies & Glen R. Waddell & Helen T. Naughton, 2004. "FDI in Space: Spatial Autoregressive Relationships in Foreign Direct Investment," NBER Working Papers 10939, National Bureau of Economic Research, Inc.
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Cited by:
  1. Facundo Albornoz & Hector Calvo-Pardo & Gregory Corcos & Emanuel Ornelas, 2010. "Sequential Exporting," CEP Discussion Papers dp0974, Centre for Economic Performance, LSE.
  2. Céline CARRERE & Vanessa STRAUSS-KAHN, 2014. "Developing Countries Exports Survival in the OECD: Does Experience Matter?," Working Papers P100, FERDI.
  3. Araujo, Luis & Mion, Giordano & Ornelas, Emanuel, 2012. "Institutions and Export Dynamics," CEPR Discussion Papers 8809, C.E.P.R. Discussion Papers.
  4. Emanuel Ornelas, 2012. "Preferential Trade Agreements and the Labor Market," CEP Discussion Papers dp1117, Centre for Economic Performance, LSE.
  5. Céline CARRERE & Vanessa STRAUSS-KAHN, 2012. "Exports Dynamics: Raising Developing Countries Exports Survival through Experience," Working Papers P35-A, FERDI.

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