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Extended Gravity

Author

Listed:
  • Gloria Sheu

    (US Department of Justice)

  • Andres Zahler

    (Diego Portales University)

  • Eduardo Morales

    (Princeton University)

Abstract

Exporting firms often enter foreign markets that are similar to previous export destinations. We develop a dynamic model in which a firm’s exports in each market may depend on how similar it is to its home country (gravity) and to its previous export destinations (extended gravity). Given the large number of export paths from which forward-looking firms may choose, we use a moment inequality approach to structurally estimate our model. We conclude that extended gravity reduces firms’ cost of foreign market entry by 27% to 40%.

Suggested Citation

  • Gloria Sheu & Andres Zahler & Eduardo Morales, 2016. "Extended Gravity," 2016 Meeting Papers 1565, Society for Economic Dynamics.
    • Handle: RePEc:red:sed016:1565
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    References listed on IDEAS

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    2. Ho, Kate & Rosen, Adam M., 2015. "Partial Identification in Applied Research: Benefits and Challenges," CEPR Discussion Papers 10883, C.E.P.R. Discussion Papers.
    3. Gumpert, Anna & Li, Haishi & Moxnes, Andreas & Ramondo, Natalia & Tintelnot, Felix, 2020. "The life-cycle dynamics of exporters and multinational firms," Journal of International Economics, Elsevier, vol. 126(C).
    4. Donald R. Davis & Jonathan I. Dingel & Joan Monras & Eduardo Morales, 2019. "How Segregated Is Urban Consumption?," Journal of Political Economy, University of Chicago Press, vol. 127(4), pages 1684-1738.
    5. Heiland, Inga, 2016. "Global Risk Sharing Through Trade in Goods and Assets: Theory and Evidence," VfS Annual Conference 2016 (Augsburg): Demographic Change 145821, Verein für Socialpolitik / German Economic Association.
    6. Fabian Eckert & Costas Arkolakis, 2017. "Combinatorial Discrete Choice," 2017 Meeting Papers 249, Society for Economic Dynamics.
    7. repec:spo:wpmain:info:hdl:2441/7an8r1ubqs93caeqs80puld0tp is not listed on IDEAS
    8. Ciliberto, Federico & Jäkel, Ina C., 2021. "Superstar exporters: An empirical investigation of strategic interactions in Danish export markets," Journal of International Economics, Elsevier, vol. 129(C).
    9. A. Kerem Cosar & Paul L. E. Grieco & Felix Tintelnot, 2015. "Borders, Geography, and Oligopoly: Evidence from the Wind Turbine Industry," The Review of Economics and Statistics, MIT Press, vol. 97(3), pages 623-637, July.
    10. Nicolas Berman & Vincent Rebeyrol & Vincent Vicard, 2019. "Demand Learning and Firm Dynamics: Evidence from Exporters," The Review of Economics and Statistics, MIT Press, vol. 101(1), pages 91-106, March.
    11. repec:hal:spmain:info:hdl:2441/7an8r1ubqs93caeqs80puld0tp is not listed on IDEAS
    12. Martina Lawless & Zuzanna Studnicka, 2018. "Old Firms and New Products: Does Experience Increase Survival?," Working Papers 201805, School of Economics, University College Dublin.
    13. Cheng, Dong & Tan, Yong & Yu, Jian, 2017. "Credit Rationing and Firm Exports: Micro Evidence from SMEs in China," MPRA Paper 81914, University Library of Munich, Germany.

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    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics

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