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Export Decision under Risk

Author

Listed:
  • Carl Gaigne

    (INRA)

  • Anne-Celia Disdier

    (Paris School of Economics-INRA)

  • Jose de Sousa

    (University of Paris-Sud)

Abstract

Does demand volatility matter for exports? How do exporting firms deal with skewed demand? A simple model of risk aversion shows that exporters react to an increase in demand volatility in destination markets by increasing their export prices and decreasing their export volumes. In sharp contrast, exporters decrease prices and increase volumes when demand skewness rises. We also show that the moments of the distribution of demand affect the extensive margin of trade. These theoretical predictions are put to the test by using French firm-level exports across destination markets with different levels of demand volatility and skewness. The firm-level results, over the period 2000-2009, are broadly consistent with our predictions.

Suggested Citation

  • Carl Gaigne & Anne-Celia Disdier & Jose de Sousa, 2015. "Export Decision under Risk," 2015 Meeting Papers 1272, Society for Economic Dynamics.
    • Handle: RePEc:red:sed015:1272
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    Cited by:

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    2. Lionel Fontagné & Gianluca Orefice & Roberta Piermartini, 2020. "Making small firms happy? The heterogeneous effect of trade facilitation measures," Review of International Economics, Wiley Blackwell, vol. 28(3), pages 565-598, August.
    3. De Sousa, José & Disdier, Anne-Célia & Gaigné, Carl, 2020. "Export decision under risk," European Economic Review, Elsevier, vol. 121(C).
    4. Ashraf, Badar Nadeem & Qian, Ningyu & Shen, Yinjie (Victor), 2021. "The impact of trade and financial openness on bank loan pricing: Evidence from emerging economies," Emerging Markets Review, Elsevier, vol. 47(C).
    5. Fracasso, Andrea & Secchi, Angelo & Tomasi, Chiara, 2022. "Export pricing and exchange rate expectations under uncertainty," Journal of Comparative Economics, Elsevier, vol. 50(1), pages 135-152.
    6. Héricourt, Jérôme & Nedoncelle, Clément, 2018. "Multi-destination firms and the impact of exchange-rate risk on trade," Journal of Comparative Economics, Elsevier, vol. 46(4), pages 1178-1193.
    7. Gervais, Antoine, 2018. "Uncertainty, risk aversion and international trade," Journal of International Economics, Elsevier, vol. 115(C), pages 145-158.
    8. Héricourt, Jérôme & Nedoncelle, Clément, 2018. "Multi-destination firms and the impact of exchange-rate risk on trade," Journal of Comparative Economics, Elsevier, vol. 46(4), pages 1178-1193.
    9. Baley, Isaac & Veldkamp, Laura & Waugh, Michael, 2020. "Can global uncertainty promote international trade?," Journal of International Economics, Elsevier, vol. 126(C).
    10. Antoine Gervais, 2021. "Global sourcing under uncertainty," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(3), pages 1103-1135, November.
    11. Abdul Rashid & M. Kabir Hassan & Hafsa Karamat, 2021. "Firm size and the interlinkages between sales volatility, exports, and financial stability of Pakistani manufacturing firms," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 11(1), pages 111-134, March.
    12. Esposito, Federico, 2022. "Demand risk and diversification through international trade," Journal of International Economics, Elsevier, vol. 135(C).
    13. Wim Naudé & Martin Cameron, 2021. "Export-Led Growth after COVID-19: The Case of Portugal," Notas Económicas, Faculty of Economics, University of Coimbra, issue 52, pages 7-53, July.
    14. William Connell & Emmanuel Dhyne & Hylke Vandenbussche, 2019. "Learning about demand abroad from wholesalers: a B2B analysis," Working Paper Research 377, National Bank of Belgium.
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    17. Carbonero, Francesco & Devicienti, Francesco & Manello, Alessandro & Vannoni, Davide, 2021. "Women on board and firm export attitudes: Evidence from Italy," Journal of Economic Behavior & Organization, Elsevier, vol. 192(C), pages 159-175.

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    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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