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How Exporters Grow

Author

Listed:
  • Doireann Fitzgerald
  • Stephanie Haller
  • Yaniv Yedid-Levi

Abstract

We show that after firms enter new export markets, there are striking dynamics of quantities, but no dynamics of prices, controlling for both costs and selection. This points to an important role for demand in the growth of successful exporters, and to a nonprice mechanism through which quantity demanded grows. A model where firms engage in costly investment in customer base through marketing and advertising, and learn about their idiosyncratic demand, can qualitatively match these facts, along with a declining exit hazard. We structurally estimate the model and find that costs of adjusting customer base are key to explaining how exporters grow.

Suggested Citation

  • Doireann Fitzgerald & Stephanie Haller & Yaniv Yedid-Levi, 2016. "How Exporters Grow," Staff Report 524, Federal Reserve Bank of Minneapolis.
    • Handle: RePEc:fip:fedmsr:524
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Customer base; exporter dynamics; Firm dynamics;
    All these keywords.

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • F10 - International Economics - - Trade - - - General

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