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Exporter Dynamics, Firm Size and Growth, and Partial Year Effects

Author

Listed:
  • Bernard, Andrew B.
  • Massari, Renzo
  • Reyes, Jose-Daniel
  • Taglioni, Daria

Abstract

Two otherwise identical firms that enter the same market in different months, one in January and one in December, will report dramatically different annual sales for the first calendar year of operations. This partial year effect in annual data leads to downward biased observations of the level of activity upon entry and upward biased growth rates between the year of entry and the following year. This paper examines the implications of partial year effects using Peruvian export data. The partial year bias is very large: the average level of first-year exports of new exporters is understated by 65 percent and the average growth rate between the first and second year of exporting is overstated by 112 percentage points. This paper re-examines a number of stylized facts about firm size and growth that have motivated rapidly expanding theoretical and empirical literatures on firm export dynamics. Correcting the partial year effect eliminates unusually high growth rates in the first year of exporting, raises initial export levels, and shifts 10 percent of market entrants from below to above the median size. Revisiting an older set of facts on firm size and growth, the paper finds that correcting for partial year biases reduces the number of small firms in the firm size distribution and weakens the negative relationship between firm growth and firm size.

Suggested Citation

  • Bernard, Andrew B. & Massari, Renzo & Reyes, Jose-Daniel & Taglioni, Daria, 2014. "Exporter Dynamics, Firm Size and Growth, and Partial Year Effects," CEPR Discussion Papers 9844, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:9844
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    References listed on IDEAS

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    1. Blanchard, Olivier Jean & Kahn, Charles M, 1980. "The Solution of Linear Difference Models under Rational Expectations," Econometrica, Econometric Society, vol. 48(5), pages 1305-1311, July.
    2. Lettau, Martin & Maggiori, Matteo & Weber, Michael, 2014. "Conditional risk premia in currency markets and other asset classes," Journal of Financial Economics, Elsevier, vol. 114(2), pages 197-225.
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    Cited by:

    1. Wang, Jian & Wang, Xiao, 2015. "Benefits of foreign ownership: Evidence from foreign direct investment in China," Journal of International Economics, Elsevier, vol. 97(2), pages 325-338.
    2. Leslie A. Martin & Shanthi Nataraj & Ann E. Harrison, 2017. "In with the Big, Out with the Small: Removing Small-Scale Reservations in India," American Economic Review, American Economic Association, vol. 107(2), pages 354-386, February.
    3. Ingo Geishecker & Philipp J.H. Schröder & Allan Sørensen, 2016. "One-off Export Events," CESifo Working Paper Series 6207, CESifo Group Munich.
    4. Joachim Wagner, 2016. "A survey of empirical studies using transaction level data on exports and imports," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 152(1), pages 215-225, February.
    5. Ryan Monarch & Tim Schmidt-Eisenlohr, 2017. "Learning and the Value of Trade Relationships," International Finance Discussion Papers 1218, Board of Governors of the Federal Reserve System (U.S.).
    6. Jonathan L. Willis & Kim J. Ruhl, 2009. "New Exporter Dynamics," 2009 Meeting Papers 111, Society for Economic Dynamics.
    7. N. Berman & V. Rebeyrol & V. Vicard, 2015. "Demand learning and firm dynamics: evidence from exporters," Working papers 551, Banque de France.
    8. Timoshenko, Olga A., 2015. "Product switching in a model of learning," Journal of International Economics, Elsevier, vol. 95(2), pages 233-249.
    9. repec:eee:reecon:v:71:y:2017:i:4:p:690-703 is not listed on IDEAS
    10. Fernandes, Ana M. & Freund, Caroline & Pierola, Martha Denisse, 2016. "Exporter behavior, country size and stage of development: Evidence from the exporter dynamics database," Journal of Development Economics, Elsevier, vol. 119(C), pages 121-137.
    11. Doireann Fitzgerald & Stefanie Haller, 2014. "Exporters and Shocks: Dissecting the International Elasticity Puzzle," Working Papers 201408, School of Economics, University College Dublin.
    12. Juan de Lucio & Raúl Mínguez & Asier Minondo & Francisco Requena, 2014. "Does the partial year effect invalidate the evidence on new exporters?," Working Papers 1401, Department of Applied Economics II, Universidad de Valencia.
    13. Görg, Holger & Henze, Philipp & Jienwatcharamongkhol, Viroj & Kopasker, Daniel & Molana, Hassan & Montagna, Catia & Sjöholm, Fredrik, 2017. "Firm size distribution and employment fluctuations: Theory and evidence," Research in Economics, Elsevier, vol. 71(4), pages 690-703.

    More about this item

    Keywords

    export entry; export growth; firm growth; firm size distribution; Heterogeneous firms; variance of firm growth;

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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