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Marginal Distance: Does Export Experience Reduce Firm Trade Costs?


  • Lawless, Martina

    (Central Bank of Ireland)


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 en- try 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 negative effects on the firm’s export sales in the market. This negative effect on sales is particularly strong 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.

Suggested Citation

  • Lawless, Martina, 2011. "Marginal Distance: Does Export Experience Reduce Firm Trade Costs?," Research Technical Papers 2/RT/11, Central Bank of Ireland.
  • Handle: RePEc:cbi:wpaper:2/rt/11

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    References listed on IDEAS

    1. Albornoz, Facundo & Calvo Pardo, Héctor F. & Corcos, Gregory & Ornelas, Emanuel, 2012. "Sequential exporting," Journal of International Economics, Elsevier, vol. 88(1), pages 17-31.
    2. Martina Lawless, 2010. "Deconstructing gravity: trade costs and extensive and intensive margins," Canadian Journal of Economics, Canadian Economics Association, vol. 43(4), pages 1149-1172, November.
    3. Aitken, Brian & Hanson, Gordon H. & Harrison, Ann E., 1997. "Spillovers, foreign investment, and export behavior," Journal of International Economics, Elsevier, vol. 43(1-2), pages 103-132, August.
    4. Lawless, Martina, 2009. "Firm export dynamics and the geography of trade," Journal of International Economics, Elsevier, vol. 77(2), pages 245-254, April.
    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, August.
    6. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    7. Blonigen, Bruce A. & Davies, Ronald B. & Waddell, Glen R. & Naughton, Helen T., 2007. "FDI in space: Spatial autoregressive relationships in foreign direct investment," European Economic Review, Elsevier, vol. 51(5), pages 1303-1325, July.
    8. Richard Fabling & Arthur Grimes & Lynda Sanderson, 2012. "Whatever next? Export market choices of New Zealand firms," Papers in Regional Science, Wiley Blackwell, vol. 91(1), pages 137-159, March.
    9. 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.
    10. Mayer, Thierry & Zignago, Soledad, 2006. "Notes on CEPII’s distances measures," MPRA Paper 26469, University Library of Munich, Germany.
    11. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2008. "Estimating Trade Flows: Trading Partners and Trading Volumes," The Quarterly Journal of Economics, Oxford University Press, vol. 123(2), pages 441-487.
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    1. repec:esr:resser:bkmnext335 is not listed on IDEAS
    2. Albornoz, Facundo & Calvo Pardo, Héctor F. & Corcos, Gregory & Ornelas, Emanuel, 2012. "Sequential exporting," Journal of International Economics, Elsevier, vol. 88(1), pages 17-31.
    3. Eduardo Morales & Gloria Sheu & Andrés Zahler, 2014. "Gravity and Extended Gravity: Using Moment Inequalities to Estimate a Model of Export Entry," NBER Working Papers 19916, National Bureau of Economic Research, Inc.
    4. Juan Lucio & Raúl Mínguez & Asier Minondo & Francisco Requena, 2016. "Networks and the Dynamics of Firms' Export Portfolio: Evidence for Mexico," The World Economy, Wiley Blackwell, vol. 39(5), pages 708-736, May.
    5. Christos Pargianas, 2016. "Endogenous Economic Institutions and Persistent Income Differences among High Income Countries," Open Economies Review, Springer, vol. 27(1), pages 139-159, February.
    6. A. Altuzarra & R. Bustillo & C. Rodríguez, 2016. "Understanding Export Market Success: Evidence from Manufacturing Firms," Open Economies Review, Springer, vol. 27(1), pages 161-181, February.
    7. Ornelas, Emanuel., 2012. "Preferential trade agreements and the labour market," ILO Working Papers 994691833402676, International Labour Organization.
    8. Céline CARRERE & Vanessa STRAUSS-KAHN, 2014. "Developing Countries Exports Survival in the OECD: Does Experience Matter?," Working Papers P100, FERDI.
    9. Salvador Gil-Pareja & Rafael Llorca-Vivero & José Martínez-Serrano, 2015. "The Uneven Impact of Continental Boundaries on Trade," Open Economies Review, Springer, vol. 26(2), pages 237-257, April.
    10. Araujo, Luis & Mion, Giordano & Ornelas, Emanuel, 2016. "Institutions and export dynamics," Journal of International Economics, Elsevier, vol. 98(C), pages 2-20.
    11. Céline CARRERE & Vanessa STRAUSS-KAHN, 2012. "Exports Dynamics: Raising Developing Countries Exports Survival through Experience," Working Papers P35-A, FERDI.
    12. Defever, Fabrice & Heid, Benedikt & Larch, Mario, 2015. "Spatial exporters," Journal of International Economics, Elsevier, vol. 95(1), pages 145-156.
    13. Bedassa Tadesse & Roger White & Elias Shukralla, 2015. "Production Efficiency and the Extensive Margins of U.S. Exporters: An Industry-level Analysis," Open Economies Review, Springer, vol. 26(5), pages 941-969, November.
    14. Céline Carrère & Vanessa Strauss-Kahn, 2017. "Export survival and the dynamics of experience," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 153(2), pages 271-300, May.
    15. Andrew J. Cassey & Katherine N. Schmeiser & Andreas Waldkirch, 2016. "Exporting Spatial Externalities," Open Economies Review, Springer, vol. 27(4), pages 697-720, September.

    More about this item


    Distance; Export performance; Heterogeneous firms;

    JEL classification:

    • F10 - International Economics - - Trade - - - General

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