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Decomposing Firm-level Sales Variation

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  • Jakob R. Munch

    (Department of Economics, University of Copenhagen)

  • Daniel X.

    (Department of Economics, University of Copenhagen)

Abstract

We measure the contribution of firm-specific effects to overall sales variation within a destination and find it remarkably low. Our empirical decomposition is structurally motivated by a heterogeneity model of exporting involving destination-specific, firm-specific, and firm-destination-specific latent effects with incidental truncation. We use a highly detailed dataset with exports by products and destinations for all Danish manufacturing firms. We find the contribution of firm-specific heterogeneity to within-destination sales variation varies greatly across HS6 products, and that for the median product it drives 31% of the sales variation. When we remove first-time exports from our sample, the median value increases to 40%, implying that firm-destination-specific effects are most important the first year. We conclude that while firm-specific productivity can account for some of the variation, the majority is explained by firm-destination-specific heterogeneity sources such as firm-destination-specific demand.

Suggested Citation

  • Jakob R. Munch & Daniel X., 2008. "Decomposing Firm-level Sales Variation," EPRU Working Paper Series 2009-05, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics, revised Jun 2009.
  • Handle: RePEc:kud:epruwp:09-05
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    Cited by:

    1. Di Comite, Francesco & Thisse, Jacques-François & Vandenbussche, Hylke, 2014. "Verti-zontal differentiation in export markets," Journal of International Economics, Elsevier, vol. 93(1), pages 50-66.
    2. Gormsen, Christian, 2009. "Intransparent Markets and Intra-Industry Trade," Working Papers 09-20, University of Aarhus, Aarhus School of Business, Department of Economics.
    3. Roc Armenter & Miklós Koren, 2015. "Economies Of Scale And The Size Of Exporters," Journal of the European Economic Association, European Economic Association, vol. 13(3), pages 482-511, June.
    4. Berman, Nicolas & Rebeyrol, Vincent & Vicard, Vincent, 2015. "Demand learning and firm dynamics: evidence from exporters," CEPR Discussion Papers 10517, C.E.P.R. Discussion Papers.
    5. Fabrice Defever & Alejandro Riaño, 2016. "Protectionism through Exporting: Subsidies with Export Share Requirements in China," Discussion Papers 2016-03, University of Nottingham, GEP.
    6. Raphael A. Auer, 2013. "Product Heterogeneity, Cross-Country Taste Differences, and the Consumption Home Bias," Working Papers 13.01, Swiss National Bank, Study Center Gerzensee.
    7. Eduardo Morales & Gloria Sheu & Andrés Zahler, 2014. "Gravity and Extended Gravity: Using Moment Inequalities to Estimate a Model of Export Entry," NBER Working Papers 19916, National Bureau of Economic Research, Inc.
    8. repec:eee:inecon:v:113:y:2018:i:c:p:20-34 is not listed on IDEAS
    9. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2011. "Multiproduct Firms and Trade Liberalization," The Quarterly Journal of Economics, Oxford University Press, vol. 126(3), pages 1271-1318.
    10. Fabrice Defever & José-Daniel Reyes & Alejandro Riaño & Miguel Eduardo Sánchez-Martín, 2017. "Special Economic Zones and WTO Compliance: Evidence from the Dominican Republic," CESifo Working Paper Series 6791, CESifo Group Munich.
    11. Fabrice Defever & Alejandro Riano, 2017. "Twin peaks," Discussion Papers 2017-15, University of Nottingham, GEP.
    12. Defever, Fabrice & Riaño, Alejandro, 2017. "Subsidies with export share requirements in China," Journal of Development Economics, Elsevier, vol. 126(C), pages 33-51.
    13. Nguyen, Daniel X., 2012. "Demand uncertainty: Exporting delays and exporting failures," Journal of International Economics, Elsevier, vol. 86(2), pages 336-344.
    14. Federico Esposito, 2016. "Risk Diversification and International Trade," 2016 Meeting Papers 302, Society for Economic Dynamics.
    15. Hu, Zhongzhong & Rodrigue, Joel & Tan, Yong & Yu, Chunhai, 2017. "Product Churning, Reallocation, and Chinese Export Growth," MPRA Paper 81813, University Library of Munich, Germany.
    16. Hu, Zhongzhong & Rodrigue, Joel & Tan, Yong & Yu, Chunhai, 2017. "Product churning, reallocation, and Chinese export growth," Journal of Economic Behavior & Organization, Elsevier, vol. 143(C), pages 147-164.
    17. David Hummels & Kwan Yong Lee, 2017. "The Income Elasticity of Import Demand: Micro Evidence and An Application," NBER Working Papers 23338, National Bureau of Economic Research, Inc.
    18. Morales, Eduardo & Sheu, Gloria & Zahler, Andrés, 2011. "Gravity and extended gravity: estimating a structural model of export entry," MPRA Paper 30311, University Library of Munich, Germany.

    More about this item

    Keywords

    firm heterogeneity; firm-level export data; truncation correction;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models

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