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Marginal Distance: Does Export Experience Reduce Firm Trade Costs?

  • Martina Lawless

    ()

Are the costs of exporting to a market reduced if a firm has experience of exporting to a neighbouring market? If so, does this effect operate through reducing entry barriers or by increasing sales once the firm is operating in the market? This paper examines linkages between current export destinations and entry, sales and exit for new markets. We find that measures of exporting experience in geographically nearby markets increase the probability of entry into a market and reduce the probability of exit. However, these same measures have very limited effect on the firm’s export sales in the market. The effect of related experience on sales tends to be negative for recently entered firms. We interpret this result in the context of the Melitz heterogeneous-firm model of trade by showing that lower fixed costs reduce the entry threshold, but this lower threshold has the effect of allowing lower-sales marginal firms to be present in the market. Copyright Springer Science+Business Media New York 2013

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File URL: http://hdl.handle.net/10.1007/s11079-013-9275-7
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Article provided by Springer in its journal Open Economies Review.

Volume (Year): 24 (2013)
Issue (Month): 5 (November)
Pages: 819-841

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Handle: RePEc:kap:openec:v:24:y:2013:i:5:p:819-841
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100323

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  1. Lawless, Martina, 2007. "Firm Export Dynamics and the Geography of Trade," MPRA Paper 10008, University Library of Munich, Germany.
  2. Facundo Albornoz & Hector F. Calvo Pardo & Gregory Corcos & Emanuel Ornelas, 2010. "Sequential Exporting," Discussion Papers 10-08, Department of Economics, University of Birmingham.
  3. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
  4. Anne-Célia Disdier & Keith Head, 2008. "The Puzzling Persistence of the Distance Effect on Bilateral Trade," The Review of Economics and Statistics, MIT Press, vol. 90(1), pages 37-48, February.
  5. Martina Lawless & Karl Whelan, 2014. "Where Do Firms Export, How Much and Why?," The World Economy, Wiley Blackwell, vol. 37(8), pages 1027-1050, 08.
  6. Brian Aitken & Gordon H. Hanson & Ann E. Harrison, 1994. "Spillovers, Foreign Investment, and Export Behavior," NBER Working Papers 4967, National Bureau of Economic Research, Inc.
  7. Lawless, Martina, 2008. "Deconstructing Gravity: Trade Costs and Extensive and Intensive Margins," MPRA Paper 10230, University Library of Munich, Germany.
  8. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2008. "Estimating Trade Flows: Trading Partners and Trading Volumes," The Quarterly Journal of Economics, MIT Press, vol. 123(2), pages 441-487, 05.
  9. Bruce A. Blonigen & Ronald B. Davies & Glen R. Waddell & Helen T. Naughton, 2004. "FDI in Space: Spatial Autoregressive Relationships in Foreign Direct Investment," NBER Working Papers 10939, National Bureau of Economic Research, Inc.
  10. Richard Fabling & Arthur Grimes & Lynda Sanderson, 2009. "Whatever next? Export market choices of New Zealand firms," Reserve Bank of New Zealand Discussion Paper Series DP2009/19, Reserve Bank of New Zealand.
  11. Mayer, Thierry & Zignago, Soledad, 2006. "Notes on CEPII’s distances measures," MPRA Paper 26469, University Library of Munich, Germany.
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