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A Search and Learning Model of Export Dynamics

Author

Listed:
  • Jonathan Eaton
  • Marcela Eslava
  • David Jinkins
  • C. J. Krizan
  • James Tybout

Abstract

Exporting abroad is much harder than selling at home, and overcoming hurdles to exporting takes time. Our goal is to identify specific barriers to exporting and to measure their importance. We develop a model of firm-level export dynamics that features costly customer search, network effects in finding buyers, and learning about product appeal. Fitting the model to customs records of U.S. imports of manufactures from Colombia we replicate patterns of exporter maturation. A potentially valuable intangible asset of a firm is its customer base and knowledge of a market. Our model delivers some striking estimates of what such assets are worth. Averaging across active exporters, the loss from total market amnesia (losing its current U.S. customer base along with its accumulated knowledge of product appeal) is US$ 3.4 million, about 34 percent of the value of exporting overall. About half is the loss of future sales to existing customers while the rest is the cost of relearning its appeal in the market and reestablishing visibility as an exporter. Given the importance of search, learning, and visibility, the 5-year response of total export sales to an exchange rate shock exceeds the 1-year response by about 40 percent.

Suggested Citation

  • Jonathan Eaton & Marcela Eslava & David Jinkins & C. J. Krizan & James Tybout, 2021. "A Search and Learning Model of Export Dynamics," Working Papers 21-17, Center for Economic Studies, U.S. Census Bureau.
  • Handle: RePEc:cen:wpaper:21-17
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    References listed on IDEAS

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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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