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Where do Firms Export, How Much and Why?

  • Lawless, Martina

    (Central Bank and Financial Services Authority of Ireland)

  • Whelan, Karl

    (University College Dublin)

The empirical finding that exporting firms are more productive on average than non-exporters has provoked a large theoretical literature based on models such as Melitz (2003), where more productive firms are more likely to overcome costs associated with trade. This paper provides a systematic empirical assessment of the Melitz framework using a unique Irish dataset that includes information on destinations and firm characteristics such as productivity. We find a number of interesting deviations from the model's predictions including a high degree of unpredictable idiosyncratic participation in export markets by firms, a relatively weak positive correlation between the extent of export participation and export sales, and a limited role for productivity in explaining firm exporting behavior. We illustrate the effect of firm heterogeneity on gravity regressions of aggregate trade flows and show how past exporting to a particular market has a strong impact on the current probability of exporting there.

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Paper provided by Central Bank of Ireland in its series Research Technical Papers with number 6/RT/08.

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Length: 38 pages
Date of creation: Sep 2008
Date of revision:
Handle: RePEc:cbi:wpaper:6/rt/08
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  1. Eaton, Jonathan & Eslava, Marcela & Kugler, Maurice & Tybout, James, 2007. "Export Dynamics in Colombia: Firm-Level Evidence," Working Paper Series rwp07-050, Harvard University, John F. Kennedy School of Government.
  2. Jonathan Eaton & Samuel Kortum & Francis Kramarz, 2008. "An Anatomy of International Trade: Evidence from French Firms," NBER Working Papers 14610, National Bureau of Economic Research, Inc.
  3. Andrew B. Bernard & J. Bradford Jensen, 1997. "Exceptional Exporter Performance: Cause, Effect, or Both?," NBER Working Papers 6272, National Bureau of Economic Research, Inc.
  4. Jonathan Eaton & Samuel Kortum & Francis Kramarz, 2004. "Dissecting trade: firms, industries, and export destinations," Staff Report 332, Federal Reserve Bank of Minneapolis.
  5. Andrew Bernard & J. Bradford Jensen & Stephen Redding & Peter Schott, 2007. "Firms in International Trade," Working Papers 07-14, Center for Economic Studies, U.S. Census Bureau.
  6. Lawless, Martina, 2009. "Firm export dynamics and the geography of trade," Journal of International Economics, Elsevier, vol. 77(2), pages 245-254, April.
  7. Roberts, Mark J & Tybout, James R, 1997. "The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs," American Economic Review, American Economic Association, vol. 87(4), pages 545-64, September.
  8. Anne-Célia Disdier & Keith Head, 2004. "The Puzzling Persistence of the Distance Effect on Bilateral Trade," Development Working Papers 186, Centro Studi Luca d\'Agliano, University of Milano.
  9. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2003. "Plants and Productivity in International Trade," American Economic Review, American Economic Association, vol. 93(4), pages 1268-1290, September.
  10. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
  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.
  12. Rubinstein, Yona & Helpman, Elhanan & Melitz, Marc, 2008. "Estimating Trade Flows: Trading Partners and Trading Volumes," Scholarly Articles 3228230, Harvard University Department of Economics.
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