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What explains the low survival rate of developing country export flows ?

  • Brenton, Paul
  • Saborowski, Christian
  • von Uexkull, Erik

Successful export growth and diversification require not only entry into new export products and markets, but also the survival and growth of export flows. This paper uses a detailed, cross-country dataset of product level bilateral export flows to illustrate that exporting is an extremely perilous activity and especially so in low-income countries. The authors find that unobserved individual heterogeneity in product-level export flow data prevails despite controlling for a wide range of observed country and product characteristics. This questions previous studies that have used the Cox proportional hazards model to model export survival. The authors estimate a Prentice-Gloeckler model, amended with a gamma mixture distribution summarizing unobserved individual heterogeneity. The empirical results confirm the significance of a range of products as well as country-specific factors in determining the survival of export flows. From a policy perspective, an interesting finding is the importance of learning-by-doing for export survival: experience with exporting the same product to other markets or different products to the same market are found to strongly increase the chance of export survival. A better understanding of such learning effects could substantially improve the effectiveness of export promotion strategies.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4951.

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Date of creation: 01 Jun 2009
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Handle: RePEc:wbk:wbrwps:4951
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  1. Rauch, J E & Watson, Joel, 1999. "Starting Small in an Unfamiliar Environment," University of California at San Diego, Economics Working Paper Series qt4rp145hc, Department of Economics, UC San Diego.
  2. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2007. "Firms in International Trade," NBER Working Papers 13054, National Bureau of Economic Research, Inc.
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  6. Luis Araujo & Emanuel Ornelas, 2007. "Trust-based trade," LSE Research Online Documents on Economics 19693, London School of Economics and Political Science, LSE Library.
  7. Kiefer, Nicholas M, 1988. "Economic Duration Data and Hazard Functions," Journal of Economic Literature, American Economic Association, vol. 26(2), pages 646-79, June.
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  9. Besedes, Tibor & Prusa, Thomas J., 2006. "Product differentiation and duration of US import trade," Journal of International Economics, Elsevier, vol. 70(2), pages 339-358, December.
  10. Brenton, Paul & Newfarmer, Richard, 2007. "Watching more than the Discovery channel : export cycles and diversification in development," Policy Research Working Paper Series 4302, The World Bank.
  11. Bruce D. Meyer, 1988. "Unemployment Insurance And Unemployment Spells," NBER Working Papers 2546, National Bureau of Economic Research, Inc.
  12. Besedes, Tibor & Prusa, Thomas J., 2011. "The role of extensive and intensive margins and export growth," Journal of Development Economics, Elsevier, vol. 96(2), pages 371-379, November.
  13. Rauch, James E., 2010. "Development through synergistic reforms," Journal of Development Economics, Elsevier, vol. 93(2), pages 153-161, November.
  14. James E. Rauch, 1996. "Networks versus Markets in International Trade," NBER Working Papers 5617, National Bureau of Economic Research, Inc.
  15. Roberts, M. & Tybout, J., 1993. "An Empirical Model of Sunk Costs and the Decision to Export," Papers 4-93-3, Pennsylvania State - Department of Economics.
  16. Tibor Besedes & Thomas Prusa, 2006. "Ins, outs, and the duration of trade," Canadian Journal of Economics, Canadian Economics Association, vol. 39(1), pages 266-295, February.
  17. Paul Brenton & Erik von Uexkull, 2009. "Product specific technical assistance for exports - has it been effective?," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 18(2), pages 235-254.
  18. Jenkins, Stephen P, 1995. "Easy Estimation Methods for Discrete-Time Duration Models," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(1), pages 129-38, February.
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