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Where do Firms Export, How Much and Why?

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  • Lawless, Martina

    (Central Bank and Financial Services Authority of Ireland)

  • Whelan, Karl

    (University College Dublin)

Abstract

The empirical finding that exporting firms are more productive on average than non-exporters has provoked a large theoretical literature based on models such as Melitz (2003), where more productive firms are more likely to overcome costs associated with trade. This paper provides a systematic empirical assessment of the Melitz framework using a unique Irish dataset that includes information on destinations and firm characteristics such as productivity. We find a number of interesting deviations from the model's predictions including a high degree of unpredictable idiosyncratic participation in export markets by firms, a relatively weak positive correlation between the extent of export participation and export sales, and a limited role for productivity in explaining firm exporting behavior. We illustrate the effect of firm heterogeneity on gravity regressions of aggregate trade flows and show how past exporting to a particular market has a strong impact on the current probability of exporting there.

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Bibliographic Info

Paper provided by Central Bank of Ireland in its series Research Technical Papers with number 6/RT/08.

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Length: 38 pages
Date of creation: Sep 2008
Date of revision:
Handle: RePEc:cbi:wpaper:6/rt/08

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  1. Eaton, Jonathan & Eslava, Marcela & Kugler, Maurice & Tybout, James, 2007. "Export Dynamics in Colombia: Firm-Level Evidence," Working Paper Series rwp07-050, Harvard University, John F. Kennedy School of Government.
  2. Rubinstein, Yona & Helpman, Elhanan & Melitz, Marc, 2008. "Estimating Trade Flows: Trading Partners and Trading Volumes," Scholarly Articles 3228230, Harvard University Department of Economics.
  3. Francis Kramarz & Jonathan Eaton & Samuel Kortum, 2005. "An Anatomy of International Trade: Evidence from French Firms," 2005 Meeting Papers 197, Society for Economic Dynamics.
  4. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
  5. Jonathan Eaton & Samuel Kortum & Francis Kramarz, 2004. "Dissecting trade: firms, industries, and export destinations," Staff Report 332, Federal Reserve Bank of Minneapolis.
  6. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2007. "Firms in International Trade," NBER Working Papers 13054, National Bureau of Economic Research, Inc.
  7. 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.
  8. Lawless, Martina, 2007. "Firm Export Dynamics and the Geography of Trade," Research Technical Papers 2/RT/07, Central Bank of Ireland.
  9. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jenson & Samuel Kortum, 2000. "Plants and Productivity in International Trade," NBER Working Papers 7688, National Bureau of Economic Research, Inc.
  10. Andrew B. Bernard & J. Bradford Jensen, 1997. "Exceptional Exporter Performance: Cause, Effect, or Both?," NBER Working Papers 6272, National Bureau of Economic Research, Inc.
  11. Roberts, Mark J & Tybout, James R, 1997. "The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs," American Economic Review, American Economic Association, vol. 87(4), pages 545-64, September.
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Cited by:
  1. Matthew Cole, 2011. "Not all trade restrictions are created equally," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 147(3), pages 411-427, September.
  2. Daniela Federici & Valentino Parisi, 2012. "Corporate Taxation and Exports," Working Papers 2012-01, Universita' di Cassino, Dipartimento di Scienze Economiche.
  3. Peter McQuade, 2010. "The Evolution of International Trade on the Extensive and Intensive Margins," The Institute for International Integration Studies Discussion Paper Series iiisdp325, IIIS, revised Apr 2010.
  4. Nguyen, Daniel X., 2012. "Demand uncertainty: Exporting delays and exporting failures," Journal of International Economics, Elsevier, vol. 86(2), pages 336-344.
  5. Lawless, Martina, 2011. "Marginal Distance: Does Export Experience Reduce Firm Trade Costs?," Research Technical Papers 2/RT/11, Central Bank of Ireland.
  6. Julian Emami Namini & Giovanni Facchini & Ricardo Lopez, 2011. "Export Growth and Factor Market Competition: Theory and Evidence," Working Papers 28, Brandeis University, Department of Economics and International Businesss School.
  7. Matthew T Cole, 2009. "The Choice of Modeling Firm Heterogeneity and Trade Restrictions," Working Papers 200920, School Of Economics, University College Dublin.
  8. shepherd, Ben, 2010. "Geographical Diversification of Developing Country Exports," World Development, Elsevier, vol. 38(9), pages 1217-1228, September.
  9. Jan Jørgensen & Philipp Schröder & Zhihao Yu, 2012. "Globalization beyond partitioning: back to Krugman’s world," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 148(1), pages 73-87, April.
  10. Cole, Matthew T. & Davies, Ronald B., 2011. "Strategic tariffs, tariff jumping, and heterogeneous firms," European Economic Review, Elsevier, vol. 55(4), pages 480-496, May.
  11. Daniel X. Nguyen, 2010. "Demand Uncertainty: Exporting Delays and Exporting Failures," Discussion Papers 10-17, University of Copenhagen. Department of Economics.
  12. Philipp J.H. Schröder & Allan Sørensen, 2010. "The Theoretical Equivalent of Empirically Measurable Exporter Productivity when Firms are Heterogeneous," Economics Working Papers 2010-06, School of Economics and Management, University of Aarhus.
  13. Di Comite, Francesco & Thisse, Jacques-François & Vandenbussche, Hylke, 2014. "Verti-zontal differentiation in export markets," Journal of International Economics, Elsevier, vol. 93(1), pages 50-66.
  14. Jakob R. Munch & Daniel X., 2008. "Decomposing Firm-level Sales Variation," EPRU Working Paper Series 2009-05, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics, revised Jun 2009.

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