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Firm location and the determinants of exporting in developing countries

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  • Farole, Thomas
  • Winkler, Deborah

Abstract

Using a cross-section of more than 40,000 manufacturing and services firms in 79 developing countries from the World Bank's Enterprise Surveys Database, this paper assesses how firm location determines the likelihood and extent of exporting in developing countries. Descriptive statistics confirm higher export participation (but not intensity) for firms in core versus non-core regions, despite the finding that firms in the core assess many aspects of the investment climate more negatively. Results from a probit model show that, in addition to firm-specific characteristics, both regional investment climate and agglomeration factors have a significant impact on export participation. Specifically, customs clearance and electricity quality matter for export participation for manufacturing firms. Although localization economies and export spillovers are associated with increased exporting, the opposite is found for urbanization economies for both manufacturing and services firms. The analysis finds that firm-level determinants of exporting matter more for firms located in non-core regions, while regional determinants and agglomeration economies play a larger role in core regions. The findings point to the presence of congestion costs in the core, and suggest that policy interventions to target export participation are likely to have a greater impact if they are focused on core regions over non-core regions, where firm-specific factors predominate. Moreover, the importance of export spillovers and localization economies highlights the potential value of efforts to remove barriers to natural agglomeration both in core and non-core regions, for example through investments in infrastructure, the provision of social services, and regional integration arrangements.

Suggested Citation

  • Farole, Thomas & Winkler, Deborah, 2011. "Firm location and the determinants of exporting in developing countries," Policy Research Working Paper Series 5780, The World Bank.
  • Handle: RePEc:wbk:wbrwps:5780
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    References listed on IDEAS

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    1. Aitken, Brian & Hanson, Gordon H. & Harrison, Ann E., 1997. "Spillovers, foreign investment, and export behavior," Journal of International Economics, Elsevier, vol. 43(1-2), pages 103-132, August.
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    3. Amiti, Mary & Smarzynska Javorcik, Beata, 2008. "Trade costs and location of foreign firms in China," Journal of Development Economics, Elsevier, vol. 85(1-2), pages 129-149, February.
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    6. Koenig, Pamina & Mayneris, Florian & Poncet, Sandra, 2010. "Local export spillovers in France," European Economic Review, Elsevier, vol. 54(4), pages 622-641, May.
    7. Jonathan Eaton, Marcela Eslava, Maurice Kugler,James Tybout, 1970. "Export Dynamics in Colombia: Firm-Level Evidence," Working Papers eg0036, Wilfrid Laurier University, Department of Economics, revised 1970.
    8. Koenig, Pamina, 2009. "Agglomeration and the export decisions of French firms," Journal of Urban Economics, Elsevier, vol. 66(3), pages 186-195, November.
    9. Kim J. Ruhl & Jonathan L. Willis, 2017. "New Exporter Dynamics," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 58, pages 703-726, August.
    10. Roberto Antonietti & Giulio Cainelli, 2011. "The role of spatial agglomeration in a structural model of innovation, productivity and export: a firm-level analysis," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 46(3), pages 577-600, June.
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    Cited by:

    1. Enrique López-Bazo & Elisabet Motellón, 2013. "“Firm exports, innovation, … and regions”," AQR Working Papers 201305, University of Barcelona, Regional Quantitative Analysis Group, revised May 2013.
    2. Farole, Thomas, 2012. "Competitiveness and Connectivity: Integrating Lagging Regions in Global Markets," World Bank - Economic Premise, The World Bank, issue 93, pages 1-5, October.
    3. Jean Dubé & Cédric Brunelle, 2014. "Dots to dots: a general methodology to build local indicators using spatial micro-data," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 53(1), pages 245-272, August.

    More about this item

    Keywords

    Regional Economic Development; Microfinance; E-Business; Banks&Banking Reform; Private Participation in Infrastructure;

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