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Extended Gravity

Listed author(s):
  • Gloria Sheu

    (US Department of Justice)

  • Andres Zahler

    (Diego Portales University)

  • Eduardo Morales

    (Princeton University)

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%.

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File URL: https://economicdynamics.org/meetpapers/2016/paper_1565.pdf
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Paper provided by Society for Economic Dynamics in its series 2016 Meeting Papers with number 1565.

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Date of creation: 2016
Handle: RePEc:red:sed016:1565
Contact details of provider: Postal:
Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page: http://www.EconomicDynamics.org/
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  1. Kate Ho & Ariel Pakes, 2014. "Hospital Choices, Hospital Prices, and Financial Incentives to Physicians," American Economic Review, American Economic Association, vol. 104(12), pages 3841-3884, December.
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  8. repec:oup:qjecon:v:132:y:2017:i:1:p:157-209. is not listed on IDEAS
  9. Igal Hendel, 1999. "Estimating Multiple-Discrete Choice Models: An Application to Computerization Returns," Review of Economic Studies, Oxford University Press, vol. 66(2), pages 423-446.
  10. Volpe Martincus, Christian & Carballo, Jerónimo, 2008. "Is export promotion effective in developing countries? Firm-level evidence on the intensive and the extensive margins of exports," Journal of International Economics, Elsevier, vol. 76(1), pages 89-106, September.
  11. Panle Jia, 2008. "What Happens When Wal-Mart Comes to Town: An Empirical Analysis of the Discount Retailing Industry," Econometrica, Econometric Society, vol. 76(6), pages 1263-1316, November.
  12. Felix Tintelnot, 2017. "Global Production with Export Platforms," The Quarterly Journal of Economics, Oxford University Press, vol. 132(1), pages 157-209.
  13. Alon Eizenberg, 2014. "Upstream Innovation and Product Variety in the U.S. Home PC Market," Review of Economic Studies, Oxford University Press, vol. 81(3), pages 1003-1045.
  14. Cristina Mitaritonna & Zhanar Akhmetova, 2013. "A Model of Firm Experimentation under Demand Uncertainty: an Application to Multi-Destination Exporters," Working Papers 2013-10, CEPII research center.
  15. Danielken Molina & Marc-Andreas Muendler, 2013. "Preparing to Export," NBER Working Papers 18962, National Bureau of Economic Research, Inc.
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