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On export duration puzzles

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  • Carl Gaigné
  • Bruno Larue
  • Wendkouni Jean-Baptiste Zongo

Abstract

We investigate two puzzles in the export duration literature. The first puzzle has to do with the frequent entries and exits of firms in export markets, which are at odds with the large fixed export costs in such markets. We introduce convex production technologies in a trade model to show how variable marginal costs create direct linkages between export markets. As fixed export costs vary across destinations, more productive firms need not necessarily export to more destinations. Cost convexity implies that the probability of supplying a given export market is adversely affected by positive export shocks in other markets. This is supported by our empirical analysis of bilateral flows for over 200 agri-food products to 176 destinations originating from six large exporting countries. The second puzzle has to do with the paradoxical effect of tariffs reported in empirical export duration studies. When endogeneity is addressed, tariffs increase the probability of an export failure.

Suggested Citation

  • Carl Gaigné & Bruno Larue & Wendkouni Jean-Baptiste Zongo, 2021. "On export duration puzzles," Working Papers SMART 21-10, INRAE UMR SMART.
  • Handle: RePEc:rae:wpaper:202110
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    More about this item

    Keywords

    cost convexity; export failure; gravity;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade

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