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What Explains the Low Survival Rate of Developing Country Export Flows?

In: INTERNATIONAL TRADE, DISTRIBUTION AND DEVELOPMENT Empirical Studies of Trade Policies

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  • Paul Brenton
  • Christian Saborowski
  • Erik von Uexkull

Abstract

Successful export growth and diversification require not only entry into new export products and markets but also the survival and growth of export flows. For a crosscountry dataset of product-level bilateral export flows, exporting is found to be a perilous activity, especially in low-income countries. Unobserved individual heterogeneity in product-level export flow data prevails even when a wide range of observed country and product characteristics are controlled for. This questions previous studies that used the Cox proportional hazards model to analyze export survival. Following Meyer (1990), a Prentice-Gloeckler (1978) model is estimated, amended with a gamma mixture distribution summarizing unobserved individual heterogeneity. The empirical results confirm the significance of a range of product- as well as country specific factors in determining the survival of new export flows. Important for policymaking is the finding of the value of learning-by-doing for export survival: experience with exporting the same product to other markets or different products to the same market is found to strongly increase the chance of export survival. A better understanding of such learning effects could substantially improve the effectiveness of export promotion strategies. Export survival, Cox proportional hazard, low-income countries.

Suggested Citation

  • Paul Brenton & Christian Saborowski & Erik von Uexkull, 2014. "What Explains the Low Survival Rate of Developing Country Export Flows?," World Scientific Book Chapters, in: INTERNATIONAL TRADE, DISTRIBUTION AND DEVELOPMENT Empirical Studies of Trade Policies, chapter 17, pages 347-372, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814603386_0017
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