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What Drives firms´ Geographic Diversification in International Markets?

Author

Listed:
  • Tomás Castagnino

    (Central Bank of Argentina)

Abstract

I build a model to show that if some export costs are sunk and shared between alike destinations, the decision of a firm to enter a market is a function of its experience in a similar one. Using a rich firm-level dataset for Argentina I test this prediction and I provide evidence on the role and nature of shared export costs. Product adaptation costs, associated to market similarities in geography and culture, and quality upgrading costs, associated to market similarities in income level, are found to be significant. Finally, I show that the failure to consider firms´ idiosyncratic experience in international markets leads to an underestimation of the difficulty to enter export markets.

Suggested Citation

  • Tomás Castagnino, 2011. "What Drives firms´ Geographic Diversification in International Markets?," BCRA Working Paper Series 201152, Central Bank of Argentina, Economic Research Department.
    • Handle: RePEc:bcr:wpaper:201152
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    File URL: http://www.bcra.gov.ar/pdfs/investigaciones/WP_52_2011i.PDF
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    More about this item

    Keywords

    experience; export costs; firm-level; geographic diversification; quality;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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