The Production Side of Exporting: Firms and Locations

This paper studies the role of production location in firm export decisions. We document a set of new facts using a custom-built, geo-located dataset of firms, plants, and customs transactions in China. Exporter firms, defined by their first export transaction, are more likely to have plants in coastal locations at the time of their entry into exporting. They are also more likely to open new plants in coastal locations post-entry. We rationalize these facts in a model where a firmÕs production decisions are guided by location-specific export costs. Estimates of the structural model highlight the importance of lower fixed costs of exporting in coastal regions. A counterfactual exercise shows that a policy to equalize the fixed costs across coastal and non-coastal locations would lead to an increase in the number of exporters and aggregate exports, with gains accruing almost entirely to firms in non-coastal locations.