Foreign Market Conditions and Export Performance: Evidence from Italian Firm-Level Data
AbstractA large body of literature in International Economics has analysed the impact of increased import competition on domestic firms. The link between firm-level exports and changes in the competitive environment on foreign markets is less well understood, however. This is despite the fact that exports make up a significant and growing share of total manufacturing production in most countries. We derive a theory-based econometric specification linking destination-specific exports to foreign demand and the degree of competitiveness or “crowdedness” of a foreign market. The latter is a summary measure of the number and productive efficiency of firms competing in a given market and the barriers impeding their access, such as tariffs or physical distance. We estimate this specification on a large sample of Italian manufacturing firms in 1992-2003 and use the results for a series of counterfactual experiments. Our findings indicate that increased numbers and efficiency of foreign firms and improvements in their access to destination markets have reduced Italian exports by around 0.2-0.4% per year. This is similar to the effects of tariff reductions for Italian firms (+0.3%/year) but smaller than the impact of higher unit labour costs (-1.4%/year) and less favourable exchange rates (-2.0%/year). By far the most important determinant of export performance was foreign demand growth, however, raising Italian exports by up to 5.3% per year or almost 60% over the sample period. Our results also indicate that China’s impact on Italian export performance is small and if anything positive. Much more important in explaining the loss of export market shares in recent years has been the relatively slow demand growth in Italy’s main export market, the EU15.
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Bibliographic InfoPaper provided by Centro Studi Luca d\'Agliano, University of Milano in its series Development Working Papers with number 258.
Date of creation: 27 Oct 2008
Date of revision:
International Trade; Competition; Exporters; Foreign Markets;
Other versions of this item:
- Holger Breinlich & Alessandra Tucci, 2008. "Foreign Market Conditions and Export Performance: Evidence from Italian Firm-Level Data," Economics Discussion Papers 659, University of Essex, Department of Economics.
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- F15 - International Economics - - Trade - - - Economic Integration
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