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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. Richard Fabling & Arthur Grimes & Lynda Sanderson, 2011. "Whatever next? Export market choices of New Zealand firms," ERSA conference papers ersa10p367, European Regional Science Association.
  2. 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.
  3. Anne-Célia Disdier & Keith Head, 2004. "The Puzzling Persistence of the Distance Effect on Bilateral Trade," Development Working Papers 186, Centro Studi Luca d\'Agliano, University of Milano.
  4. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
  5. Facundo Albornoz & Hector Calvo-Pardo & Gregory Corcos & Emanuel Ornelas, 2010. "Sequential Exporting," CEP Discussion Papers dp0974, Centre for Economic Performance, LSE.
  6. Lawless, Martina, 2007. "Firm Export Dynamics and the Geography of Trade," Research Technical Papers 2/RT/07, Central Bank of Ireland.
  7. 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.
  8. Rubinstein, Yona & Helpman, Elhanan & Melitz, Marc, 2008. "Estimating Trade Flows: Trading Partners and Trading Volumes," Scholarly Articles 3228230, Harvard University Department of Economics.
  9. Martina Lawless & Karl Whelan, 2008. "Where Do Firms Export, How Much, and Why?," Working Papers 200821, School Of Economics, University College Dublin.
  10. Martina Lawless, 2010. "Deconstructing gravity: trade costs and extensive and intensive margins," Canadian Journal of Economics, Canadian Economics Association, vol. 43(4), pages 1149-1172, November.
  11. Mayer, Thierry & Zignago, Soledad, 2006. "Notes on CEPII’s distances measures," MPRA Paper 26469, University Library of Munich, Germany.
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Cited by:
  1. Albornoz, Facundo & Calvo Pardo, Héctor F. & Corcos, Gregory & Ornelas, Emanuel, 2012. "Sequential exporting," Journal of International Economics, Elsevier, vol. 88(1), pages 17-31.
  2. Luis Araujo & Giordano Mion & Emanuel Ornelas, 2012. "Institutions and export dynamics," Working Paper Research 220, National Bank of Belgium.
  3. Céline CARRERE & Vanessa STRAUSS-KAHN, 2014. "Developing Countries Exports Survival in the OECD: Does Experience Matter?," Working Papers P100, FERDI.
  4. Céline CARRERE & Vanessa STRAUSS-KAHN, 2012. "Exports Dynamics: Raising Developing Countries Exports Survival through Experience," Working Papers P35-A, FERDI.
  5. Emanuel Ornelas, 2012. "Preferential Trade Agreements and the Labor Market," CEP Discussion Papers dp1117, Centre for Economic Performance, LSE.

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