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The ABCs of Firm Heterogeneity When Firms Sort into Markets: The Case of Exporters

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  • Bernardo S. Blum
  • Sebastian Claro
  • Ignatius Horstmann
  • David A. Rivers

Abstract

We develop a novel methodology for disentangling the demand and cost drivers of firm heterogeneity when firms sort themselves into different markets, and we apply it to export status differences. Our methodology results in joint estimates of firm-level productivity and of markups in every market, without imposing functional form restrictions on demand. We find that exporters, relative to nonexporters, (i) have flatter domestic demand curves—thicker domestic markets—and (ii) have higher demand conditional on productivity. Finally, (iii) these demand advantages translate to foreign markets, thereby leading to export status differences.

Suggested Citation

  • Bernardo S. Blum & Sebastian Claro & Ignatius Horstmann & David A. Rivers, 2024. "The ABCs of Firm Heterogeneity When Firms Sort into Markets: The Case of Exporters," Journal of Political Economy, University of Chicago Press, vol. 132(4), pages 1162-1208.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/727289
    DOI: 10.1086/727289
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    Cited by:

    1. Brugués, Felipe & Kikkawa, Ayumu Ken & Mei, Yuan & Robles, Pablo, 2025. "The impact of NAFTA on prices and competition: Evidence from Mexican manufacturing plants," Journal of International Economics, Elsevier, vol. 155(C).
    2. Jaan Masso & Amaresh K Tiwari, 2024. "Retracted: Estimating Production Function And Productivity Impact Of Export Persistence In Presence Of Market Imperfections," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 150, Faculty of Economics and Business Administration, University of Tartu (Estonia).
    3. Kabir, Poorya & Tan, Eugene & Vardishvili, Ia, 2025. "Quantifying the allocative efficiency of capital: The role of capital utilization," Journal of Monetary Economics, Elsevier, vol. 155(C).
    4. Joris Tielens & Simone Lenzu & David A. Rivers & Shi Hu, 2025. "Financial shocks, producivity and prices," Working Paper Research 479, National Bank of Belgium.

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