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Entrepreneurship and the extensive margin in export growth : a microeconomic accounting of Costa Rica's export growth during 1997-2007

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  • Lederman, Daniel
  • Rodriguez-Clare, Andres
  • Yi Xu, Daniel

Abstract

The literature on the correlation between exports and economic development runs deep into the history of economic thought and permeates policy debates. This paper studies the microeconomic structure of export growth in Costa Rica, with special emphasis on the extensive margin of trade, encompassing new exporting firms, new products, and new export markets, as well as the unit values of new versus incumbent products. The data suggest that few new firms survive the test of exporting -- more than 40 percent of firms exit export activities after one year -- and this firm turnover is associated with a steady deterioration of export unit values (prices). Furthermore, most new export products are associated with product switching by incumbent exporting firms. The typical new product introduced by incumbent firms tended to be priced at about 90 percent of the unit values of incumbent products. In contrast, the usual suspected obstacles to export growth, such as the inability of small firms to enter exporting activities or to grow their exports, appear to be important sources of export growth. In fact, the smallest exporting firms experienced the fastest growth in their export values. Some of these results are compared with those from other countries that have been examined in related literature.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 5376.

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Date of creation: 01 Jul 2010
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Handle: RePEc:wbk:wbrwps:5376

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Keywords: Economic Theory&Research; Markets and Market Access; Airports and Air Services; Microfinance; Tax Law;

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  1. Ozden, Caglar & Sharma, Gunjan, 2004. "Price effects of preferential market access : the Caribbean Basin Initiative and the apparel sector," Policy Research Working Paper Series 3244, The World Bank.
  2. Eric A. Verhoogen, 2008. "Trade, Quality Upgrading, and Wage Inequality in the Mexican Manufacturing Sector," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 123(2), pages 489-530, 05.
  3. Eaton, Jonathan & Eslava, Marcela & Kugler, Maurice & Tybout, James, 2007. "Export Dynamics in Colombia: Firm-Level Evidence," Working Paper Series, Harvard University, John F. Kennedy School of Government rwp07-050, Harvard University, John F. Kennedy School of Government.
  4. Costas Arkolakis, 2011. "A Unified Theory of Firm Selection and Growth," NBER Working Papers 17553, National Bureau of Economic Research, Inc.
  5. Juan Carlos Hallak & Jagadeesh Sivadasan, 2009. "Firms' Exporting Behavior under Quality Constraints," NBER Working Papers 14928, National Bureau of Economic Research, Inc.
  6. Lederman, Daniel & Olarreaga, Marcelo & Payton, Lucy, 2006. "Export promotion agencies : what works and what doesn't," Policy Research Working Paper Series 4044, The World Bank.
  7. Marcus Noland & Howard Pack, 2003. "Industrial Policy in an Era of Globalization: Lessons from Asia," Peterson Institute Press: All Books, Peterson Institute for International Economics, Peterson Institute for International Economics, number 358, July.
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