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Shipment frequency of exporters and demand uncertainty

Listed author(s):
  • Békès, G.
  • Fontagné, L.
  • Murakozy, B.
  • Vicard, V.

This paper analyzes how firms adjust to differences in market size and demand uncertainty by changing the frequency and size of their export shipments. In our inventory model, transportation costs and optimal shipment frequency are determined on the basis of demand as well as inventory and per shipments costs. Using a cross section of detailed monthly firm-product-destination level French export data we show that, in line with the predictions of the model, firms adjust on both margins for market size. In a stochastic setting, increased demand uncertainty is associated with larger logistics costs as well as a more convex marginal cost function. Firms adjust to increased uncertainty by reducing their sales and, for a given export volume, by reducing their number of shipments and increasing their shipment size. We show that these predictions of the model are in line with patterns in the data.

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File URL: https://publications.banque-france.fr/sites/default/files/medias/documents/working-paper_479_2014.pdf
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Paper provided by Banque de France in its series Working papers with number 479.

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Length: 41 pages
Date of creation: 2014
Handle: RePEc:bfr:banfra:479
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Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS

Web page: http://www.banque-france.fr/

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