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Export market diversification and productivity improvements: theory and evidence from Argentinean firms

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  • Luciana Juvenal
  • Paulo Santos Monteiro

Abstract

This paper examines the relationship between trade and investment in technology adoption when firms face demand uncertainty. Our model predicts that, for a given overall market size, exporting to several countries reduces firms' demand uncertainty and, hence, raises incentives to invest in productivity improvements. The effects of diversification are heterogeneous across firms: An additional foreign market matters more for firms exporting to fewer destinations. We test the proposed theory using a large sample of Argentinean manufacturing exporters. The predictions of the model find strong support in the data.

Suggested Citation

  • Luciana Juvenal & Paulo Santos Monteiro, 2013. "Export market diversification and productivity improvements: theory and evidence from Argentinean firms," Working Papers 2013-015, Federal Reserve Bank of St. Louis.
  • Handle: RePEc:fip:fedlwp:2013-015
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    References listed on IDEAS

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    1. Christopher A. Hennessy & Toni M. Whited, 2007. "How Costly Is External Financing? Evidence from a Structural Estimation," Journal of Finance, American Finance Association, vol. 62(4), pages 1705-1745, August.
    2. Alla Lileeva & Daniel Trefler, 2007. "Improved Access to Foreign Markets Raises Plant-Level Productivity ... for Some Plants," NBER Working Papers 13297, National Bureau of Economic Research, Inc.
    3. Hall, Robert E, 1988. "The Relation between Price and Marginal Cost in U.S. Industry," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 921-947, October.
    4. Claudia M. Buch & Jörg Döpke & Harald Strotmann, 2009. "Does Export Openness Increase Firm‐level Output Volatility?," The World Economy, Wiley Blackwell, vol. 32(4), pages 531-551, April.
    5. De Loecker, Jan, 2007. "Do exports generate higher productivity? Evidence from Slovenia," Journal of International Economics, Elsevier, vol. 73(1), pages 69-98, September.
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    Cited by:

    1. Gnangnon, Sèna Kimm, 2020. "Aid for Trade flows and Poverty Reduction in Recipient-Countries," EconStor Preprints 213807, ZBW - Leibniz Information Centre for Economics.
    2. Davit Belkania & Mehman Karimov, 0. "An Empirical Examination of the Export-Led Growth Theory Regarding Georgia," European Journal of Marketing and Economics, European Center for Science Education and Research, vol. 1, EJME Sept.
    3. Hongbo Liu & Hanho Kim & Justin Choe, 2019. "Export diversification, CO2 emissions and EKC: panel data analysis of 125 countries," Asia-Pacific Journal of Regional Science, Springer, vol. 3(2), pages 361-393, June.
    4. Abdul Rashid & M. Kabir Hassan & Hafsa Karamat, 2021. "Firm size and the interlinkages between sales volatility, exports, and financial stability of Pakistani manufacturing firms," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 11(1), pages 111-134, March.
    5. Hu, Guoheng & Can, Muhlis & Paramati, Sudharshan Reddy & Doğan, Buhari & Fang, Jianchun, 2020. "The effect of import product diversification on carbon emissions: New evidence for sustainable economic policies," Economic Analysis and Policy, Elsevier, vol. 65(C), pages 198-210.
    6. Gonzague Vannoorenberghe & Zheng Wang & Zhihong Yu, 2014. "Volatility and Diversification of Exports: Firm-Level Theory and Evidence," CESifo Working Paper Series 4916, CESifo.
    7. Abdul Rashid & M. Kabir Hassan & Hafsa Karamat, 0. "Firm size and the interlinkages between sales volatility, exports, and financial stability of Pakistani manufacturing firms," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 0, pages 1-24.
    8. Vannoorenberghe, Gonzague & Wang, Zheng & Yu, Zhihong, 2016. "Volatility and diversification of exports: Firm-level theory and evidence," European Economic Review, Elsevier, vol. 89(C), pages 216-247.
    9. Bussolo,Maurizio & Vargas Da Cruz,Marcio Jose, 2015. "Does input tariff reduction impact firms'exports in the presence of import tariff exemption regimes ?," Policy Research Working Paper Series 7231, The World Bank.

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    Keywords

    Trade; Technology - Economic aspects; Argentina;
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