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Foreign Market Conditions and Export Performance: Does 'Crowdedness' Reduce Exports?

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  • Breinlich, Holger
  • Tucci, Alessandra

Abstract

This paper analyzes the link between firm exports and the competitive environment in foreign markets. We derive a theory-based econometric specification linking destination-specific exports to foreign demand and the degree of 'crowdedness' of foreign markets. The latter is a measure of the number and efficiency of firms competing in a given market and the barriers impeding their access. We estimate this specification on a large sample of Italian manufacturing firms between 1992 and 2003 and use the results for counterfactual experiments. We find that increases in the crowdedness of foreign markets have reduced Italian exports by around 0.2%-0.3% per year. However, other factors such as higher unit labor costs and weak demand growth in Italy's main export market (the EU15) have been much more important in explaining Italian export performance. Our results also indicate that China's impact on Italian exports is small and if anything positive.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7975.

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Date of creation: Sep 2010
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Handle: RePEc:cpr:ceprdp:7975

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Keywords: Competition; Exporters; Foreign Markets; International Trade;

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References

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  1. Bronwyn H. Hall & Francesca Lotti & Jacques Mairesse, 2009. "Innovation and productivity in SMEs. Empirical evidence for Italy," Temi di discussione (Economic working papers) 718, Bank of Italy, Economic Research and International Relations Area.
  2. Luigi Benfratello & Fabio Schiantarelli & Alessandro Sembenelli, 2005. "Banks and Innovation: Microeconometric Evidence on Italian Firms," Boston College Working Papers in Economics 631, Boston College Department of Economics, revised 13 Jun 2007.
  3. Tiziano Razzolini & Davide Vannoni, 2008. "Export Premia and Sub-Contracting Discount. Passive Strategies and performance in Domestic and Foreign Markets," Development Working Papers 237, Centro Studi Luca d\'Agliano, University of Milano.
  4. Andrea Caggese & Vicente Cuñat, 2005. "Financing Constraints and Fixed-Term Employment Contracts," Working Papers 266, Barcelona Graduate School of Economics.
  5. J. M. C. Santos Silva & Silvana Tenreyro, 2006. "The Log of Gravity," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 641-658, November.
  6. Alfredo Minerva & Lorenzo Casaburi & Valeria Gattai, 2008. "Firms’ International Status and Heterogeneity in Performance: Evidence From Italy," Working Papers 2008.3, Fondazione Eni Enrico Mattei.
  7. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," American Economic Review, American Economic Association, vol. 98(4), pages 1707-21, September.
  8. Gordon H. Hanson & Raymond Robertson, 2010. "China and the Manufacturing Exports of Other Developing Countries," NBER Chapters, in: China's Growing Role in World Trade, pages 137-159 National Bureau of Economic Research, Inc.
  9. Barba Navaretti, Giorgio & Faini, Riccardo & Tucci, Alessandra, 2008. "Does Family Control Affect Trade Performance? Evidence for Italian Firms," CEPR Discussion Papers 7082, C.E.P.R. Discussion Papers.
  10. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2007. "Estimating Trade Flows: Trading Partners and Trading Volumes," NBER Working Papers 12927, National Bureau of Economic Research, Inc.
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Cited by:
  1. Crafts, Nicholas, 2012. "Western Europe's Growth Prospects: an Historical Perspective," CEPR Discussion Papers 8827, C.E.P.R. Discussion Papers.
  2. Nicholas Crafts, 2013. "Long-Term Growth in Europe: What Difference does the Crisis Make?," National Institute Economic Review, National Institute of Economic and Social Research, vol. 224(1), pages R14-R28, May.
  3. Crafts, Nicolas & Magnani, Marco, 2011. "The Golden Age and the Second Globalization in Italy," CAGE Online Working Paper Series 61, Competitive Advantage in the Global Economy (CAGE).
  4. Yang, Yong & Mallick, Sushanta, 2014. "Explaining cross-country differences in exporting performance: The role of country-level macroeconomic environment," International Business Review, Elsevier, vol. 23(1), pages 246-259.

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