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Why Don’t Firms Export More? Product Quality and Colombian Plants

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  • Brooks, Eileen

Abstract

Exporting firms around the world ship only a small fraction of their output overseas. For firms in a large country, such as the United States, this behavior can be explained by the existence of a large domestic market. For firms in a small lower income country, such as Colombia, the lower share of exports remains a puzzle. This paper begins by illustrating the failure of current models to explain plant export patterns in Colombia. Even models that do well in describing the US export distribution fail when confronted with the Colombian data. In response to this puzzle, this paper proposes a model in which wealthier individuals produce and consume higher quality products. Predictions of the model are tested on Colombian plant level data from 1981-1991. Overall, product quality is shown to be a significant factor in explaining the tendency for Colombian plants to under-export manufactured goods to the United States.

Suggested Citation

  • Brooks, Eileen, 2003. "Why Don’t Firms Export More? Product Quality and Colombian Plants," Santa Cruz Department of Economics, Working Paper Series qt0t95h27d, Department of Economics, UC Santa Cruz.
    • Handle: RePEc:cdl:ucscec:qt0t95h27d
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    References listed on IDEAS

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    Cited by:

    1. Amit Khandelwal, 2010. "The Long and Short (of) Quality Ladders," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 77(4), pages 1450-1476.
    2. Juan Carlos Hallak, 2004. "Product Quality, Linder, and the Direction of Trade," NBER Working Papers 10877, National Bureau of Economic Research, Inc.
    3. Hallak, Juan Carlos, 2006. "Product quality and the direction of trade," Journal of International Economics, Elsevier, vol. 68(1), pages 238-265, January.
    4. Ha, Le Thanh, 2023. "The role of financial development in enhancing trades in environmental goods: International insights from 119 countries," Journal of Commodity Markets, Elsevier, vol. 29(C).
    5. Békés, Gábor & Harasztosi, Péter, 2013. "Agglomeration premium and trading activity of firms," Regional Science and Urban Economics, Elsevier, vol. 43(1), pages 51-64.
    6. Marco Alderighi, 2006. "Why Should a Firm Choose to Limit the Size of Its Market Area?," ERSA conference papers ersa06p900, European Regional Science Association.
    7. International Monetary Fund, 2006. "Republic of Slovenia: Selected Issues," IMF Staff Country Reports 2006/250, International Monetary Fund.

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