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Export Decision under Risk

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  • José De Sousa
  • Anne-Célia Disdier
  • Carl Gaigné

Abstract

Using firm and industry data, we unveil two empirical regularities: (i) Demand uncertainty not only reduces export probabilities but also decreases export quantities and increases export prices; (ii) The most productive exporters are more affected by higher industry-wide expenditure volatility than are the least productive exporters. We rationalize these regularities by developing a new firm-based trade model wherein managers are risk averse. Higher volatility induces the reallocation of export shares from the most to the least productive incumbents. Greater skewness of the demand distribution and/or higher trade costs weaken this effect. Our results hold for a large class of consumer utility functions.

Suggested Citation

  • José De Sousa & Anne-Célia Disdier & Carl Gaigné, 2017. "Export Decision under Risk," Working Papers SMART - LERECO 17-10, INRAE UMR SMART-LERECO.
  • Handle: RePEc:rae:wpaper:201710
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    Cited by:

    1. Héricourt, Jérôme & Nedoncelle, Clément, 2018. "Multi-destination firms and the impact of exchange-rate risk on trade," Journal of Comparative Economics, Elsevier, vol. 46(4), pages 1178-1193.
    2. Héricourt, Jérôme & Nedoncelle, Clément, 2018. "Multi-destination firms and the impact of exchange-rate risk on trade," Journal of Comparative Economics, Elsevier, vol. 46(4), pages 1178-1193.
    3. Baley, Isaac & Veldkamp, Laura & Waugh, Michael, 2020. "Can global uncertainty promote international trade?," Journal of International Economics, Elsevier, vol. 126(C).
    4. De Sousa, José & Disdier, Anne-Célia & Gaigné, Carl, 2020. "Export decision under risk," European Economic Review, Elsevier, vol. 121(C).
    5. Gervais, Antoine, 2020. "Global Sourcing under Uncertainty," MPRA Paper 102285, University Library of Munich, Germany.
    6. Connell, William & Dhyne, Emmanuel & Vandenbussche, Hylke, 2019. "Learning About Demand Abroad From Wholesalers: a B2B Analysis," CEPR Discussion Papers 14123, C.E.P.R. Discussion Papers.
    7. Gervais, Antoine, 2018. "Uncertainty, risk aversion and international trade," Journal of International Economics, Elsevier, vol. 115(C), pages 145-158.
    8. 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.
    9. Wim Naudé & Martin Cameron, 2021. "Export-Led Growth after COVID-19: The Case of Portugal," Notas Económicas, Faculty of Economics, University of Coimbra, issue 52, pages 7-53, July.
    10. 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.

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    More about this item

    Keywords

    firm exports; demand uncertainty; risk aversion; expenditure volatility; skewness;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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