Exporter dynamics, firm size and growth, and partial year effects
AbstractTwo otherwise identical firms that enter the same market in different months, one in January and one in December, will report dramatically different annual sales for the first calendar year of operations. This partial year effect in annual data leads to downward biased observations of the level of activity upon entry and upward biased growth rates between the year of entry and the following year. This paper examines the implications of partial year effects using Peruvian export data. The partial year bias is very large: the average level of first-year exports of new exporters is understated by 65 percent and the average growth rate between the first and second year of exporting is overstated by 112 percentage points. This paper re-examines a number of stylized facts about firm size and growth that have motivated rapidly expanding theoretical and empirical literatures on firm export dynamics. Correcting the partial year effect eliminates unusually high growth rates in the first year of exporting, raises initial export levels, and shifts 10 percent of market entrants from below to above the median size. Revisiting an older set of facts on firm size and growth, the paper finds that correcting for partial year biases reduces the number of small firms in the firm size distribution and weakens the negative relationship between firm growth and firm size.
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Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 6711.
Date of creation: 01 Nov 2013
Date of revision:
Microfinance; Markets and Market Access; Achieving Shared Growth; Economic Growth; Debt Markets;
Other versions of this item:
- Andrew B. Bernard & Renzo Massari & Jose-Daniel Reyes & Daria Taglioni, 2014. "Exporter Dynamics, Firm Size and Growth, and Partial Year Effects," NBER Working Papers 19865, National Bureau of Economic Research, Inc.
- Bernard, Andrew B. & Massari, Renzo & Reyes, Jose-Daniel & Taglioni, Daria, 2014. "Exporter Dynamics, Firm Size and Growth, and Partial Year Effects," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9844, C.E.P.R. Discussion Papers.
- C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
- D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
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- Juan de Lucio & Raúl Mínguez & Asier Minondo & Francisco Requena, 2014. "Does the partial year effect invalidate the evidence on new exporters?," Working Papers, Department of Applied Economics II, Universidad de Valencia 1401, Department of Applied Economics II, Universidad de Valencia.
- Doireann Fitzgerald & Stefanie Haller, 2014.
"Exporters and Shocks: Dissecting the International Elasticity Puzzle,"
Working Papers, School Of Economics, University College Dublin
201408, School Of Economics, University College Dublin.
- Doireann Fitzgerald & Stefanie Haller, 2014. "Exporters and Shocks: Dissecting the International Elasticity Puzzle," NBER Working Papers 19968, National Bureau of Economic Research, Inc.
- Leslie A. Martin & Shanthi Nataraj & Ann Harrison, 2014. "In with the Big, Out with the Small: Removing Small-Scale Reservations in India," NBER Working Papers 19942, National Bureau of Economic Research, Inc.
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