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Marginal Distance: Does Export Experience Reduce Firm Trade Costs?

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  • Lawless, Martina

    (Central Bank of Ireland)

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 en- try 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 negative effects on the firm’s export sales in the market. This negative effect on sales is particularly strong 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.

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Bibliographic Info

Paper provided by Central Bank of Ireland in its series Research Technical Papers with number 2/RT/11.

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Date of creation: Mar 2011
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Handle: RePEc:cbi:wpaper:2/rt/11

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Keywords: Distance; Export performance; Heterogeneous firms;

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References

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  1. Aitken, B. & Hanson, G.H. & Harrison, A.E., 1994. "Spillovers, Foreign Investment and Export Behavior," Papers, Columbia - Graduate School of Business 95-06, Columbia - Graduate School of Business.
  2. Lawless, Martina, 2007. "Firm Export Dynamics and the Geography of Trade," MPRA Paper 10008, University Library of Munich, Germany.
  3. repec:cbi:wpaper:6/rt/08 is not listed on IDEAS
  4. Anne-Célia Disdier & Keith Head, 2008. "The Puzzling Persistence of the Distance Effect on Bilateral Trade," The Review of Economics and Statistics, MIT Press, vol. 90(1), pages 37-48, February.
  5. Thierry Mayer & Soledad Zignago, 2011. "Notes on CEPII’s distances measures: The GeoDist database," Working Papers 2011-25, CEPII research center.
  6. Facundo Albornoz & Héctor Calvo-Pardo & Gregory Corcos & Emanuel Ornelas, 2010. "Sequential exporting," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 28724, London School of Economics and Political Science, LSE Library.
  7. Martina Lawless, 2010. "Deconstructing gravity: trade costs and extensive and intensive margins," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 43(4), pages 1149-1172, November.
  8. Richard Fabling & Arthur Grimes & Lynda Sanderson, 2011. "Whatever next? Export market choices of New Zealand firms," ERSA conference papers ersa10p367, European Regional Science Association.
  9. Mark J. Melitz, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," NBER Working Papers 8881, National Bureau of Economic Research, Inc.
  10. Martina Lawless & Karl Whelan, 2008. "Where Do Firms Export, How Much, and Why?," Working Papers, School Of Economics, University College Dublin 200821, School Of Economics, University College Dublin.
  11. Blonigen, Bruce A. & Davies, Ronald B. & Waddell, Glen R. & Naughton, Helen T., 2007. "FDI in space: Spatial autoregressive relationships in foreign direct investment," European Economic Review, Elsevier, Elsevier, vol. 51(5), pages 1303-1325, July.
  12. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2008. "Estimating Trade Flows: Trading Partners and Trading Volumes," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 123(2), pages 441-487, 05.
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Cited by:
  1. Albornoz-Crespo, Facundo & Calvo Pardo, Hector F. & Corcos, Gregory & Ornelas, Emanuel, 2010. "Sequential Exporting," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8103, C.E.P.R. Discussion Papers.
  2. Luis Araujo & Giordano Mion & Emanuel Ornelas, 2012. "Institutions and export dynamics," Working Paper Research, National Bank of Belgium 220, National Bank of Belgium.
  3. Céline CARRERE & Vanessa STRAUSS-KAHN, 2012. "Exports Dynamics: Raising Developing Countries Exports Survival through Experience," Working Papers, FERDI P35-A, FERDI.
  4. Céline CARRERE & Vanessa STRAUSS-KAHN, 2014. "Developing Countries Exports Survival in the OECD: Does Experience Matter?," Working Papers, FERDI P100, FERDI.
  5. Ornelas, Emanuel, 2012. "Preferential Trade Agreements and the Labor Market," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8805, C.E.P.R. Discussion Papers.

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