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The Role of Extensive and Intensive Margins and Export Growth

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Abstract

We investigate and compare countries' export growth based on their performance at the extensive and intensive export margins. Our empirical approach is motivated by an extension to the Melitz (2003) model of heterogeneous firms in which exporters are subject to a one-time sunk cost and also a per-period fixed cost. With imperfect information a firm may enter export markets but shortly exit when it learns its per-period fixed costs. We apply this insight to disaggregated export data and confirm that indeed most export relationships are very short lived. We then show that the survival issue is a significant factor in explaining differences in long run export performance. We find that developing countries would experience significantly higher export growth if they were able to improve their performance with respect to the two key components of the intensive margin: survival and deepening.

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... Most advances in the theoretical and empirical trade literature mainly concern the differences in the roles of the intensive and extensive margins in trade growth [4,5]. Besedeš and Prusa introduced survival analysis, which is widely used in biology and medicine, into the research of international trade [6,7]. Recent contributions have begun to emphasize the importance of enhanced survival of existing trade relationships to the long-term trade growth [8,9]. ...
... Hence, this export trade relationship has had three trade spells. By treating these trade spells as mutually independent, the results of the survival analysis are robust [7,44]. 2 Censored data. There are two cases for censored data. ...
... Little of the previous literature related to the trade of environmental goods focuses on trade survival. Trade survival is closely related to the intensive margin and the extensive margin of trade [7,48]. Based on the data at the HS-6 digit level, we used survival analysis to present the survival characteristics of China's exports and imports of environmental goods over the period 2002-2020 and compared them with those of other major exporting and importing countries. ...
Article
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Based on data at the HS-6 digit level, this paper uses survival analysis to present characteristics concerning the survival of China’s exports and imports of environmental goods during the period 2002–2020, and compares them with those of other major exporting and importing countries. The major findings are summarized as follows: For exports, the average length of all trade spells was 8.36 years, and the length of only 18.72% of them was more than 18 years, which shows a disadvantage compared with other countries. The hazard rate was 0.31 in the first year of export, and the export survival rate of China’s environmental goods was always at the highest level compared with the others. By category, the export survival of environmental monitoring and evaluation goods was the best, and the export survival of renewable energy goods was the worst. For imports, the average length of all trade spells was 6.08 years, and the length of 50.37% of them was equal to 1 year, which are worse results than those of other countries. The hazard rate was up to 0.48 in the first year of imports, which is higher than those of other countries. By category, the environmental monitoring and evaluation goods had worse early import survival and better long-term survival, whereas the renewable energy goods experienced the opposite. Whether for exports or imports, the survival rate is higher when China trades with regions that signed a regional trade agreement with it.
... Nevertheless, as proved by Besedeš and Prusa (2006a), Besedeš & Prusa (2006b) and Sabuhoro et al. (2006), trade relationships are short-lived. Particularly in developing countries that create new trade relationships faster than developed countries but have slow export growth rates due to low survival rates (Besedeš & Prusa, 2011;Brenton et al., 2010). Conversely, high export growth rates of developed countries are credited to their high survival rates in their importing markets. ...
... The only difference is that the intensive margin evaluates the performance (value and volume) of existing export relationships at two points in time. In contrast, export survival measures the likelihood of these relationships remaining active in the intervening period (Besedeš & Prusa, 2011). Thus, in contrast to an intensive margin approach, which displays only the value and amount of exports, assessing export performance by survival shows the frailty (entry, exit, and churn) of business relationships. ...
... As aforesaid, the intensive margin is closely related to export survival. However, the intensive margin evaluates the performance (i.e., value and volume) of existing export relationships at two points in time, while export survival measures the probability of these relationships remaining active in the intervening period (Besedeš & Prusa, 2011). ...
Article
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This study investigates the effect of GATS, a service-specific trade agreement, on the survival of service exports from Kenya to 176 countries between 1995 and 2019. Services are classified at a 1-digit level: travel, transport, computer and information, construction, financial, insurance, government, other business, and personal, cultural, and recreational services. The discrete-time probit model with random effects reveals that GATS reduces the survival of service exports by 0.78%. At the category level, GATS only increases the survival of construction and government services. GATS also reduces the survival of Kenya’s exports to Africa when geographical regions are considered. However, GATS boosts the survival of services when it is interacted with the quality of institutions and the Services Trade Restrictiveness Index (STRI). Accordingly, reducing regulations and general improvement of the quality of institutions can help countries reap the benefits of a service-specific trade agreement fully.
... Yet, as a matter of policy, it is important to improve export duration so as to raise levels of long-run export growth and deepen existing trade relationships. Most countries and firms make more sales from trading with existing partners and selling existing products than trading with new partners and selling new products (Besedeš & Prusa, 2011). The case of existing products and partners is known as the intensive margin, while the case of new partners and new products is the extensive margin (Besedeš & Prusa, 2011). ...
... Most countries and firms make more sales from trading with existing partners and selling existing products than trading with new partners and selling new products (Besedeš & Prusa, 2011). The case of existing products and partners is known as the intensive margin, while the case of new partners and new products is the extensive margin (Besedeš & Prusa, 2011). The intensive margin is related to export duration/survival as the latter tracks the likelihood of a country/ firm exporting a current product to an existing market over time (Besedeš & Prusa, 2011). ...
... The case of existing products and partners is known as the intensive margin, while the case of new partners and new products is the extensive margin (Besedeš & Prusa, 2011). The intensive margin is related to export duration/survival as the latter tracks the likelihood of a country/ firm exporting a current product to an existing market over time (Besedeš & Prusa, 2011). Thus, identifying factors that cause higher duration rates may help policy makers improve the export perfomance of their countries. ...
Article
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This paper investigates the effect of urbanization on export duration in Cote d’Ivoire using HS 6-digit level bilateral export data between Cote d’Ivoire and 155 countries from 1996 to 2018. We found that the mean and median duration of exporting in Cote d’Ivoire are 1.8 years and 1 year, respectively. Using a discrete-time logit model with random effects, we established that urbanization in the importing country reduces survival of Ivorian exports, specifically, in Sub-Saharan Africa, and in low- and middle-income countries. Urbanization in Europe and Central Asia and in high-income countries improves survival of Ivorian exports, while the internal urbanization index has not contributed to maintain export duration.
... Following Besedeš and Prusa (2011), we define the extensive margins as the total number of products traded (exported or imported) with a specific trade partner in a particular month. ...
... Trade margins are channels of tracking variations (value and volume) in trade flows, often decomposed into extensive and intensive. The extensive margin captures changes in trade arising from the number of products and markets while the intensive margin tracks changes in the export flow of existing trade ties(Besedeš and Prusa, 2011). Trade survival is the likelihood that a trade relationship stays active for a specific period. ...
... It is closely related to the intensive margin. However, the intensive margin evaluates the performance (value and quantity) of existing trade relationships at two points in time while trade survival measures the probability of these relationships remaining active in the intervening period(Besedeš and Prusa, 2011). ...
Article
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The Philippines was among the most infected countries in East Asia at the onset of the COVID-19 outbreak. This study analyzes how international trade on various margins was affected by the country's own lockdown policies and those of trading partners. Using a monthly series of product-by-country data for the period from January 2019 to December 2020 and an event study design, the paper shows that domestic lockdown measures did not affect international trade but external lockdowns affected both exports and imports. Get the full paper by freely downloading DOI: https://elibrary.worldbank.org/doi/abs/10.1596/1813-9450-9911
... The arguments that what you export matters Hidalgo et al. 2007), and where you export to matters (Brambilla et al. 2012;Baliamoune-Lutz 2011;Bastos and Silva 2010), can be measured side-by-side in our framework, as a tool for guiding how growth priorities are set. Our work also helps to measure the relative importance of the export growth options documented in earlier work-specializing or diversifying products (Koren and Tenreyro 2013;Besedeš and Prusa 2011;Hummels and Klenow 2005) and diversifying destinations (Newfarmer et al. 2009;Rose 2007). ...
... Our research question is closely related to the extensive body of work on the margins of export growth. Papers in this literature explain growth in terms of product variety (e.g., Hummels and Klenow 2005;Besedeš and Prusa 2011;Cadot et al. 2011), country-level and destination effects (Eaton et al. 2011;Di Giovanni and Levchenko 2012), and changes at the firm-level or other combinations (e.g., Chaney 2008;Eaton et al. 2007;Amiti and Freund 2010). While work in this area has largely emphasized high-income and middle-income countries, we focus on countries with the greatest potential benefit from a new perspective on relevant margins for export growth. ...
... While work in this area has largely emphasized high-income and middle-income countries, we focus on countries with the greatest potential benefit from a new perspective on relevant margins for export growth. The decomposition approach proposed in this paper differs notably from earlier works that emphasize the intensive versus extensive margins (e.g., Mora and Olabisi 2020;Besedeš and Prusa 2011;Schott 2008), or studies that emphasize factor inputs and productivity in explaining export growth (e.g., Egger and Prȗša 2016;Nigai 2016, 2015). ...
Article
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We offer a new approach that explains long-run export growth, and how export growth varies by economic development. The approach relies on a heterogeneous-firm model that parses drivers of export growth along the following dimensions: comparative advantage changes, product demand growth, country-level growth, global growth, and growth in destinations reached. We show that aggregate trade growth for a product is a stronger driver of exports in the same product heading for high-income countries, but is less so for middle-income and low-income countries. Country-level export drivers explain more of export growth at the product-level in middle-income countries, compared to other country-groups. High-income countries appear to benefit more from secular trade growth trends, though the latter results are not as statistically robust. Finally, having more destinations is the most notable driver of the observed export growth in our analysis. Low-income countries appear to benefit the most from entering new markets. The main findings hold up to several robustness checks.
... Studies such as those by Dennis and Shepherd (2011), Lee and Kim (2012), Persson (2013), Feenstra and Ma (2014), , Fontagné et al. (2020), and Töngür et al. (2020) estimate the effect of trade facilitation on trade margins, which are channels of tracking changes (value and volume) in export flows, classified into extensive and intensive margins. In our context, the extensive margin captures changes in exports arising from trading in new markets and new products while the intensive margin tracks changes in export flows of established trade ties (Besedeš and Prusa 2011). 1 The studies on trade margins are closely related to ours because export survival is connected to the intensive margin of trade. The only difference is that the intensive margin evaluates the performance (i.e., value and volume) of existing export relationships at two points in time, while export survival measures the likelihood of these relationships remaining active in the intervening period (Besedeš and Prusa 2011). ...
... In our context, the extensive margin captures changes in exports arising from trading in new markets and new products while the intensive margin tracks changes in export flows of established trade ties (Besedeš and Prusa 2011). 1 The studies on trade margins are closely related to ours because export survival is connected to the intensive margin of trade. The only difference is that the intensive margin evaluates the performance (i.e., value and volume) of existing export relationships at two points in time, while export survival measures the likelihood of these relationships remaining active in the intervening period (Besedeš and Prusa 2011). Thus, in contrast to an approach using the intensive margin, which displays only the value and amount of exports, assessing export performance by survival shows the frailty (entry, exit, and churn) of business relationships. ...
... Thus, in contrast to an approach using the intensive margin, which displays only the value and amount of exports, assessing export performance by survival shows the frailty (entry, exit, and churn) of business relationships. While successfully and poorly performing exporters differ in their ability to create new trade relations, disparities in their ability to sustain existing relations are more significant (Brenton et al. 2010;Besedeš and Prusa 2011). Ultimately, high export survival rates deepen existing trade relationships and improve long-term export growth while low survival thwarts this possibility. ...
Article
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This study investigates the effects of logistics performance on export survival using a sample of 28 European Union (EU-28) exporters and 70 importers for the 2005–2017 period. We find that the mean duration of EU-28 exports is 2.37 years. Furthermore, the duration is two months longer when partners have higher than average levels of Logistics Performance Index (LPI). Estimates from the discrete-time logit model with random effects indicate that improvements in logistics performance in both the exporting and importing country significantly increase the survival of EU-28 exports. We also find that the “hard” logistics of importers have a greater impact on the duration of EU-28 exports than do those of exporters. Conversely, the “soft” logistics of exporters have a greater effect on the duration of EU-28 exports than do those of importers.
... Understanding the determinants of export survival is crucial for developing countries, in which export growth and a strong export sector are critical to economic development (see Besedeš and Blyde, 2010;and Besedeš and Prusa, 2011). While low export survival might, in part, reflect experimentation, the fact that survival rates are so low for developing countries can be the result of their specific characteristics, among which, underdeveloped financial markets stands out (Eaton et al., 2008;Besedeš and Blyde, 2010;Prusa, 2006a and2011;Brenton, Saborowski, and Von Uexkull, 2010). ...
... Second, the persistence of existing export relationships or "export survival." Third, increase in the volume of exports in existing relationships, that is, deepening existing export relationships (see Besedeš and Blyde, 2010;and Besedeš and Prusa, 2011). Much of this literature argues that export survival and the deepening of existing relationships are intrinsically linked; (Besedeš and Prusa, 2011). ...
... Third, increase in the volume of exports in existing relationships, that is, deepening existing export relationships (see Besedeš and Blyde, 2010;and Besedeš and Prusa, 2011). Much of this literature argues that export survival and the deepening of existing relationships are intrinsically linked; (Besedeš and Prusa, 2011). ...
Research
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Exporting is a finance-intensive activity. But credit markets are frequently underdeveloped and domestic financing tends to be scarce in developing countries, for which a strong export sector is crucial for economic development. Thus, this paper investigates whether foreign financing provides better financing conditions than domestic financing and/or otherwise unavailable external finance, thus increasing export survival rates in a developing country. To that end, it assembles a unique dataset, rarely available for other countries, containing information on foreign credit obtained by Argentine exporters. Based on the empirical models conventionally used in the export survival literature—specifically the probit random effects and the clog-log setups—we provide evidence of a positive link between foreign financing and export survival. This finding is confirmed using an instrumental variable approach.
... Understanding the determinants of export survival is crucial for developing countries, in which export growth and a strong export sector are critical to economic development (see Besedeš and Blyde, 2010;and Besedeš and Prusa, 2011). While low export survival might, in part, reflect experimentation, the fact that survival rates are so low for developing countries can be the result of their specific characteristics, among which, underdeveloped financial markets stands out (Eaton et al., 2008;Besedeš and Blyde, 2010;Prusa, 2006a and2011;Brenton, Saborowski, and Von Uexkull, 2010). ...
... Second, the persistence of existing export relationships or "export survival." Third, increase in the volume of exports in existing relationships, that is, deepening existing export relationships (see Besedeš and Blyde, 2010;and Besedeš and Prusa, 2011). Much of this literature argues that export survival and the deepening of existing relationships are intrinsically linked; (Besedeš and Prusa, 2011). ...
... Third, increase in the volume of exports in existing relationships, that is, deepening existing export relationships (see Besedeš and Blyde, 2010;and Besedeš and Prusa, 2011). Much of this literature argues that export survival and the deepening of existing relationships are intrinsically linked; (Besedeš and Prusa, 2011). ...
Conference Paper
Full-text available
Exporting is a finance-intensive activity. But credit markets are frequently underdeveloped and domestic financing tends to be scarce in developing countries, for which a strong export sector is crucial for economic development. Thus, this paper investigates whether foreign financing provides better financing conditions than domestic financing and/or otherwise unavailable external finance, thus increasing export survival rates in a developing country. To that end, it assembles a unique dataset, rarely available for other countries, containing information on foreign credit obtained by Argentine exporters. Based on the empirical models conventionally used in the export survival literature—specifically the probit random effects and the clog-log setups—we provide evidence of a positive link between foreign financing and export survival. This finding is confirmed using an instrumental variable approach.
... Multiple factors affect a firm's export growth at the micro firm level, such as reduction of production costs, improvement of product quality, and relaxation of financial constraints. Along with these factors, a firm's product export survival has drawn increased attention from researchers, demonstrating that export survival or the period of a product exported is critical in enhancing a country's export volume (Besede s & Prusa, 2011). Besedes and Blyde (2010) established through the counterfactual method that if the product export survival of Latin American countries reaches the level of the developed countries, their export volume will increase massively. ...
... Several reasons make it hard for developing countries to maintain sustainable exports of existing products and develop new export relations. 1 Firstly, it requires significant resources to expand the extensive margin and deepen the intensive margin of existing export products and markets (Besede s & Prusa, 2011;Manova, 2013). Therefore, firms in developing countries often suffer from strong financial constraints and cannot enter the international market independently. ...
Article
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Establishing stable export relations is significant for developing countries to realize industrialization through exporting manufactured products. Based on the export data of 100 developing countries on the product level from 1999 to 2015, this paper empirically explores the relationship between FDI and product export survival of the host country using the survival analysis model. The estimations show that FDI is conducive to the extension of the export duration of domestic products, and this effect is more evident in products with comparative advantages. Mechanism inspections prove that FDIs extend the export duration of products by improving their quality. To overcome endogenous problems, this paper establishes instrumental variables of FDI based on population and geographical factors. The results of the two-stage least square regression support the conclusions derived from the benchmark regression. This paper provides new empirical evidence for the role of FDI in export promotion and resource allocation.
... iii. Intensive and extensive margins From a comparative standpoint, both intensive and extensive margins (Besedes & Prusa, 2007) reflect either specialisation or diversification of exports. They've also grown in importance due to the adoption and expansion of new technology (Battisti, Canepa, & Stoneman, 2009;Comin, Hobijn, & Ravito, 2006). ...
... Extensive margins play a role in increasing trade volumes, boosting exports due to R&D, explaining linkages between technology and trade (Castillejo, Hig on, & Llopis, 2011;Hummels & Klenow, 2005). Intensive margins also help in promoting trade volumes (Bernard, Jensen, Redding, & Schott, 2009;Besedes & Prusa, 2007;Brenton & Newfarmer, 2007;Helpman, Melitz, & Rubinstein, 2008). Equations (4) and (5) show how to calculate intensive and extensive margins ...
Article
The present paper aims at exploring performance of India’s performance showcasing differing technological strength and competitive trade performance from 1991 to 2017 across two significant manufacturing sectors. The factors capturing trade competitiveness in the form of revealed comparative advantage (RCA) and trade margins and variables considering technological capabilities/competence through global value chains (GVCs) participation, foreign direct inflows (FDI) and research & development (R&D) expenditure present a comparative performance of these two sectors through linkages between trade and technology. The analysis undertaken leads to the examination of both short-and long-run time series resulting in cointegration and causality among the variables. The findings provide interesting interpretations for these sectors as for textiles and clothing (T&C) there exists a long-run relationship and for electronics and hardware (E&H) only short-run relationship exists among the variables. This provides policymakers with guidance in the form of well-timed and informed policies.
... The small role for the extensive margin is due primarily to the small initial size of new entrants relative to incumbents. Besedeš and Prusa (2011) argue that new export relationships at the country-product level are too small to have an appreciable impact on export growth in the first year. ...
... The bottom half of the table expands the definition of the extensive margin to include new products and new markets from continuing firms as well as firms new to exporting as in Besedeš and Prusa (2011). This broader definition of the extensive margin of trade now accounts for more than 50 percent of aggregate export growth. ...
... Current literature documents a positive link between extensive margins and export growth. The literature has also found that diversifying exports leads to greater stability in foreign exchange earnings in developing countries (Hummels & Klenow, 2005;Besedes & Prusa, 2011). Similarly, an intensive margin also successfully explains the export growth process. ...
Article
International trade plays a pivotal role in growth and development. The use of ICT is profoundly changing the landscape for international trade and expands opportunities especially for developing countries. The key objective of this study is to investigate the effects of different ICT capacities on the extensive and intensive margins of firm-level exports using micro-data of manufacturing firms operating in selected South Asian countries. We employ the Probit and fractional response models as estimation techniques. Findings of the study reveal that different ICT capacities are positively associated with both the extensive and intensive margins of firm-level exports, and our results are robust to the alternative empirical specifications. These results have important implications for designing the export promotion policies in selected South Asian countries. Hence, policy practitioners in these countries should encourage firms to invest in ICT capacities to boost their export performance.
... I also find model coeffcients to be higher for developing countries than developed countries. This probably reflects trends found in the literature: (i) Bettter trade and production performance of developing countries vis-à-vis developed countries during 2000(WTO (2008); (ii) Falling trade potential in developed countries based on extensive and intensive margins (Besedes and Prusa (2007)) and the emergence of multipolar world (Lin (2011)) due to catching-up by developing countries; and (iii) Increased participation of developing countries in trade of networked products. Table 4, except for TAR, HDI or IMEX for developed countries in both years. ...
Conference Paper
Studies reveal that path to a developed India lies through the East-Asian growth model. I add insights to this using a trade growth decomposition model based on growth accounting. Trade growth is decomposed into input, technological, efficiency, and random effects. I begin by estimating an inverse gravity model with variables capturing East-Asian growth that are also relevant to India's future. Thereafter I calculate trade decomposition components and undertake simulation analysis. Like all developing countries, Indian trade is found to be dominated by input and efficiency effects with a small technological effect component. China also shows a similar trend but has a lower input effect and a higher efficiency effect vis-à-vis India. Developed countries offer a balanced contribution from all three components. From the simulation exercise, I find that by improving on aspects relevant to the East-Asian growth model, India gains in capacity expansion and utilization, trade dynamics, and resilience. I suggest the use of the model as a quantitative tool for research on India's structural transformation to a $5-10 trillion economy.
... Current literature documents a positive link between extensive margins and export growth. The literature has also found that diversifying exports leads to greater stability in foreign exchange earnings in developing countries (Hummels & Klenow, 2005;Besedes & Prusa, 2011). Similarly, an intensive margin also successfully explains the export growth process. ...
Article
Full-text available
International trade plays a pivotal role in growth and development. The use of ICT is profoundly changing the landscape for international trade and expands opportunities especially for developing countries. The key objective of this study is to investigate the effects of different ICT capacities on the extensive and intensive margins of firm-level exports using micro-data of manufacturing firms operating in selected South Asian countries. We employ the Probit and fractional response models as estimation techniques. Findings of the study reveal that different ICT capacities are positively associated with both the extensive and intensive margins of firm-level exports, and our results are robust to the alternative empirical specifications. These results have important implications for designing the export promotion policies in selected South Asian countries. Hence, policy practitioners in these countries should encourage firms to invest in ICT capacities to boost their export performance.
... United Kingdom Discrete-time duration models [41] Intensive and extensive import margins, sunk costs, fixed costs per period 46 countries Kaplan-Meier survival function [42] ...
Article
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This study analyzes the impact of mobility, as a proxy for social distancing measures, on exports to the United States of America (USA). A mobility index based on Google mobility indicators was constructed using Principal Component Analysis (PCA), and an Accelerated Failure Time (AFT) model was fitted to the data on export survival from a group of Latin American countries (LATAM). Higher mobility levels are associated with an acceleration of the risk of interruption of exports. On average, LATAM shows higher export survival levels compared to other countries. Higher innovation and market concentration favored export survival, while higher levels of Real Effective Exchange Rate (REER) are associated with a lower probability of survival. Differences in survival were found between export sectors with regard to machinery and transportation equipment.
... Based on these prior studies, we apply this sunk cost and fixed cost explanations to product entry and exit in the export market. While RER depreciation leads to increases in new product 5 Conversely, Besedeš and Prusa (2011) emphasised that significant export growth in developing countries is due to intensive margins. in the export market, a comparable degree of RER appreciation does not increase exits significantly. ...
Article
This study examines the impact of industry real exchange rate (RER) shocks on plant and product exports using a comprehensive dataset for South Korea from 1990 to 1996. We find that RER changes have heterogeneous effects on real exports of existing exporters in terms of their productivity, and the positive RER depreciation effect on exports is more pronounced for less productive plants. At a product level, we find that a weak home currency prompts exporters to introduce new products to the export market, especially more remarkable for low‐productivity plants. In contrast, a strong home currency leads to product exit with less significance. Lastly, we find that the net RER effect on exporting product scope is insignificant; however, plants with higher productivity reduce their product scope more during RER appreciation.
... Considering the role of export mode, Dai et al. (2020) find an inverted-U relationship between innovation intensity and firms' export survival by using panel data from China during 2000-2010. Besedeš and Prusa (2011) argue that for long-run export growth, the survival of trading relationships is important. Thus, to improve export growth, developing countries focus on the existing relationships. ...
Article
This study examines performances and varieties of export of IP sensitive products across emerging countries, namely, India and China by utilizing 6-digit disaggregated product-level export data. Further, this study constructs trade margins - extensive and intensive margins to understand trade potential and different trade patterns, specifically, exporters' productivity, product diversification, and volume of trade during 2007-2016. This study finds India's performance is comparable with China at the extensive margin though the gap between India and China is very wide in terms of the total value of exports and the intensive margin. China majorly exports more expensive electronics and manufacturing-related products as opposed to relatively cheaper medicinal and synthetic products, the total value of exports from China to the rest of the world is much higher than that of India. This study suggests that India is exporting IP-sensitive products to lower-income countries sufficiently, but the IP-sensitive exports to higher-income countries are still lagging.
... The numerous researchers analyze how to trade growth occurs through the intensive or extensive margins, such as Hummels and Klenow (2005) One reason that explains the diversification of results, as suggested in Besedeš and Prusa (2011), is the different definitions of the extensive and intensive margins those authors used. Two methods used to measure trade margins are the count and share methods. ...
... In another study, Besedeš (2011) found different hazard rates for export of different period for transitional countries reference priced, homogeneous goods and differentiated goods for different periods of study. By considering Melitz (2003) model of heterogeneous firms in which exporters are subject to a one-time sunk cost and also a per-period fixed cost, Besedeš & Prusa, (2011) has tested the trade duration for 46 countries. They conclude that interpreting changes in the extensive margin as an indication of export success is not straight forward. ...
Technical Report
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Task 5.4 Persistence of supply chain relations (M24-34) Lead partner: IAMO; Task members: All partners leading a case study This task focuses on chain relation histories in order to analyse persistence, and thus sustainability and its determinants of business/trade relationships along the selected food supply chains. The market entry and exit of a certain supply chain actor (e.g., food producers, traders, or retailers) will be analysed as required for the integrated model development through proportional survival-hazard model allowing for time-varying covariates, i.e., the risk of slipping out of a certain supply chain changes with the length of time an actor spent in this chain. By considering the data availability, the following country commodity are analysed: salmon from Norway at the firm level trade data, wheat from France at country level trade data, and dairy from Germany, France and UK at country level trade data are studied. The additional impact of a number of covariates, such as firm’s trade characteristics, geographic/regional conditions, and trade or production policies are assessed. In particular, the effects of economic integration agreements on the stability of product-level trade relationships for European export firms, together with the analysis of determinants of trade flow durations, is analysed. Patterns of persistence (i.e., sustainability) of selected supply chains in different countries is identified by comparing the estimation results obtained (i.e., survival-hazard model). The results show higher persistency for wheat, and dairy at the EU level and lower persistency for Norwegian salmon. Additionally, we recognised increase of persistency for dairy products after elimination of milk quota. Generally speaking, different markets show different level of persistency back to the nature of products, available competition in the market, trade policy in place or production policy in place. Access link: https://ec.europa.eu/research/participants/documents/downloadPublic?documentIds=080166e5e84f1fcd&appId=PPGMS
... Second, this kind of measure favours big-sized countries, since the larger the country is, the more product lines it has. Third, in focusing on the number of relationships, earlier studies have overlooked the role of survival; the vast majority of developing country export relationships fail almost immediately after commencing -about 7 of 10 new export relationships fail within two years (Besedeš and Prusa, 2011). Finally, although it deals with the volume on existing export lines, the IM also contributes to diversification through changes in the distribution of the individual proportions. ...
Thesis
Major changes in international trade related to the crucial participation of emerging countries inworld markets have been challenging the traditional perception of trade. Instead of only specializing inthe products in which they have a comparative advantage, developing countries consider export diversificationas an alternative way to improve economic growth and reduce external adverse shocks. Besides,the global financial crisis in 2008 raised the need for an examination of the relationship between realexchange rate (RER) and trade.In this line, this thesis attempts to investigate the causal link between export diversification andRER in the middle-income countries. Firstly, we find a bidirectional causality between our two variablesof interest. By differentiating the countries’ exports by destination, the same bidirectional link isrecorded in the case of South-North trade, while a unidirectional causality running from RER to exportdiversification is recorded in the South-South trade.Secondly, we compare this relationship between two groups of countries, Asia versus Latin America,and the effect of the two financial crises (in 1997 and 2008) on this link. We show that, regardlessof the financial crises, the bidirectional causality exists for the Latin American countries and the conventionallink from RER to export diversification for Asian countries. However, when accounted forfinancial crises, the bidirectional causality is found in both subgroups.Thirdly, we address the question of the effect of export diversification on price elasticity of importsin two models of integration in the Pacific-Rim, that is: the traditional model (the US) and a new modelof integration (China). We find consistent negative price elasticity of imports for China and a positive onein the case of the US. When their trading partners are successful in diversifying their export destinations,import price elasticity of either China or the US becomes very low. This result challenges our awarenessof the Marshall-Lerner condition.Fourthly, to investigate how a country could diversify her exports, we look at real exchange rateshocks as a factor that may promote firm productivity. Using the difference-in-differences methodologyon firm-level data for Vietnamese manufacturing, we find a positive effect of a persistent real appreciationin the Vietnamese dong on firm productivity. We note that research and development (R&D) could explainthe mechanism by which real appreciation improves firm productivity.
... The second set measures the extensive margins conditional on the exporting activity including changes in the number of exported products and destinations. The final dependent variable measures the intensive margin through changes in export flows of existing trade ties(Besedes & Prusa, 2011). ...
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The empirical evidence on the impact of import competition on economic performance relies mainly on import tariff liberalization as the source of changes to competition. This paper extends this evidence by focusing on non-tariff measures, an increasingly important trade policy tool globally. The analysis examines the competition effect of four specific non-tariff measures on the exporting activity of the universe of Indonesian firms. The focus is on measures that do not clearly address any negative externalities of imports—the supposed objective of non-tariff measures—and hence appear to be protectionist in nature. The results suggest that by restricting import competition, these measures reduce the survival of firms in export markets as well as the intensive and extensive margins of their exports. Non-tariff measures have a more negative effect than import tariffs in most cases and these results are robust to various checks. The analysis provides suggestive evidence that markups are an important channel through which these effects are mediated.
... Freund, 2010;Besedeš & Prusa, 2011;Felbermayr & Kohler, 2006;Helpman et al., 2008) or through the introduction of new export products (Evenett & Venables, 2002;Hummels & Klenow, 2005). Given that it is easier to sell more in existing markets than to introduce entirely new products, this study will focus on expansion of existing exports. ...
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To generate sufficient foreign exchange earnings for economic transformation, Ghana needs to expand its export base. This study analysed Ghana's bilateral export potential and gap using the stochastic frontier gravity model for a panel of 61 key trading countries over the period 2000–2018. The results show a mean untapped export potential of US$1.1 billion and a mean gap of US$1 billion for Ghana. The tax burden of trading partners, poor infrastructure and low credit to the private sector limit the exploitation of Ghana's bilateral export potential. On the basis of these findings, it is recommended that the government and policy‐makers of Ghana should increase investment in trade‐related infrastructure, provide reliable and affordable electricity supply, deal decisively with corruption and negotiate for the elimination of all forms of barriers to increase export flows.
... That is, must Ghana continue with the diversification taking place within the old export structure, that is, adding value to existing raw materials or primary products, or should entirely new products (and markets) be found? It is an established fact that export growth emanates from expansion in the existing export basket (Helpman et al., 2008;Besedes and Prusa, 2007) as well as the introduction of new export products (Hummels and Klenow, 2005;Amurgo-Pacheco and Pierola, 2008). Unravelling the mystery surrounding Ghana's poor export performance requires taking a critical look at the efficiency of the existing export structure and scouting for new products to augment the export basket. ...
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Ghana needs to expand its export base to generate sufficient foreign exchange earnings for economic transformation. There is, therefore, a need to examine the efficiency of the existing export basket and explore new products to add to it. This study employs the stochastic frontier gravity model to investigate the efficiency of bilateral exports of Ghana using a panel of 44 export destination countries for the period 2000 to 2018. In addition, a product space analysis is carried out to ascertain which other products Ghana must diversify into in order to engender the transformation required for the attainment of Sustainable
... Extensive and intensive margins as measure of the extent and intensity of using a resource are widely applied in the labor market, development economics and world trade literature (e.g. Besedes and Prusa, 2011;Blundell et al., 2011Blundell et al., , 2013Mamo et al., 2019). For instance, the number of workers or export relations a year are used as a measure for extensive margin, and the number of average working hours or average value of an export relationship for intensive margin. ...
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Purpose Although previous research has examined the role of franchising for the economic development of countries, no empirical study to date has investigated the importance of franchising for social, infrastructural, and institutional development. The authors address this research gap by applying research results from the field of sustainable entrepreneurship and highlight that franchising has a positive impact on economic, social, institutional and infrastructural development. Design/methodology/approach This study uses a fixed-effects model on a panel dataset for 2006–2015 from 49 countries to test the hypothesis that franchising positively influences various dimensions of country development such as economic social institutional and infrastructural development. Findings The findings highlight that franchising has a positive impact on the economic, social, infrastructural, and institutional development of a country. Specifically, the results show that the earlier and the more franchising systems enter a country, the stronger the positive impact of franchising on the country's economic, social, institutional, and infrastructural development. Research limitations/implications This study has several limitations that provide directions for further research. First, the empirical investigation is limited by the characteristics of the data, which are composed of information from 49 countries (covering a period of 10 years). Because franchising is not recognized as a form of entrepreneurial governance in many emerging and developing countries, the available information is mainly provided by the franchise associations in the various countries. Hence, there is a need to collect additional data in each country and to include additional countries. Second, although the authors included developed and developing countries in the analysis, the authors could not differentiate between developed and developing countries when testing the hypotheses, because the database was not sufficiently complete. Third, future studies should analyze the causality issue between franchising and development more closely. The role of franchising in development may be changing depending on different unobserved country factors, economic sector characteristics, or development stages. Practical implications What are the practical implications of this study for the role of franchising in the development of emerging and developing economies? Because public policy in emerging and developing countries suffers from a lack of financial resources to improve the social, infrastructural and institutional environment, entrepreneurs, such as franchisors who expand into these countries, play an important role for these countries' development. In addition to their entrepreneurial role of exploring and exploiting profit opportunities, they are social, institutional, and political entrepreneurs who may positively influence country development (Schaltegger and Wagner, 2011; Shepard and Patzelt, 2011). Specifically, the findings highlight that countries with an older franchise sector (more years of franchise experience) may realize first-mover advantages and hence larger positive spillover effects on their economic, social, institutional and infrastructural development than countries with a younger franchise sector. Hence, governments of emerging and developing countries have the opportunity and responsibility to reduce potential market entry barriers and provide additional incentives for franchise systems in order to trigger these positive spillover effects. The authors expect that the spillover effects from the franchise sector on the economic, institutional, social and infrastructural development of a country are stronger in emerging and developing countries than in developed countries. Originality/value Previous research has focused on the impact of franchising on the economic development of a country, such as its growth of gross domestic product (GDP), employment, business skills, innovation and technology transfer. This study extends the existing literature by going beyond the impact of franchising on economic development: the results show that franchising as an entrepreneurial activity offers opportunities for economic, social, institutional, and infrastructural development, all of which are particularly important for emerging and developing economies. The findings of this study contribute to the international franchise and development economics literature by offering a better understanding of the impact of franchising on country development.
... Besedeš, 2008;Besedeš & Prusa, 2006a, 2006bBrenton et al., 2010;Nitsch, 2009;Obashi, 2010). Peterson et al., (2017) argue that this phenomenon can be explained by various factors, including firms testing export markets by entering and then exiting them after learning about the potential for profit, uncertainty regarding fixed-entry costs in export markets (Melitz, 2003), and demand-related conditions that cannot be resolved until after entry (Besedeš & Prusa, 2011). Notwithstanding this research, the extent to which the related phenomenon can be explained by the structure of trade network has not been given closer scrutiny. ...
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While the positive effect of economic integration on trade is commonly accepted, we still lack a proper understanding of the complex patterns behind this phenomenon. In particular, it is important to better understand how the structure of trade linkages evolves. To advance our knowledge about this matter, we test two specific predictions that originate from the recent literature on network effects in trade relations: (1) that the size of an initial trade network is positively correlated with building new trade linkages; (2) that the evolution of a trade network in a given country depends on the trade network of its trading partners. Using data related to intra‐EU trade in dairy products between 2001 and 2015, we find support for both these predictions.
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Resumen En 2003, Chile y la República de Corea firmaron el primer tratado de libre comercio transpacífico. Los objetivos de ambos países eran diferentes: mientras Chile procuraba aumentar, diversificar y añadir valor a sus exportaciones, la República de Corea tenía un objetivo de economía política de iniciar negociaciones preferenciales y consideraba a Chile un candidato ideal para explorar esa vía. Este artículo se centra en los objetivos que llevaron a Chile a firmar el tratado. Se estudian los efectos que este ha tenido en las exportaciones chilenas, aplicando un método de controles sintéticos para evaluar el efecto del tratado en las exportaciones respecto del valor y número de productos. Además, se analiza el impacto del tratado en los márgenes intensivo y extensivo de las exportaciones chilenas. Si bien se constata que el tratado ha tenido un efecto positivo sobre las exportaciones, este efecto no es significativo para nuevos productos exportados. Palabras clave Relaciones económicas, comercio exterior, libre comercio, acuerdos económicos, exportaciones, valor, evaluación, metodología estadística, política comercial, Chile, República de Corea Clasificación JEL F13, F14, F53
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Exporters pay high fixed costs to enter foreign markets, yet the majority will not export beyond one year. What happens to these exporters after they fail abroad? For these firms, exporting likely resulted in heavy profit losses. Despite this, the trade literature largely ignores export failure and views exporting as a simple cost-benefit analysis based on foreign profits and trade costs. This rationale ignores the differential effect export failure may have on financially-constrained firms. This study develops a heterogeneous-firm model with financial constraints and marketing costs to show how export failure can have the following effects: (1) make the liquidity constraint more likely to bind, (2) force financially-constrained firms to limit marketing expenditure and, hence, decrease domestic sales, and (3) induce some firms to default. A Colombian dataset merging firm-level trade and financial data is built to test the propositions of the model. The author finds evidence that export failure has a differential impact on financially-constrained firms. After exporting, financially constrained unsuccessful exporters have a worse cash flow to total assets ratio, lower domestic revenue, slower domestic revenue growth, and a higher probability of going out of business. The findings are robust to comparisons with similar successful exporters and even non-exporters, and an instrumental variable approach.
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Products and firms are homogeneous in traditional foreign trade theories; products show no horizontal or vertical differentiation. It is observed that growth in exports is only related to an increase in export quantity and that this is not decomposed into margins. Since Melitz's work, there has been an increase in studies that decompose the firms' heterogeneity and export growth in foreign trade into extensive and intensive margins. The concepts are addressed in the literature known as “new-new” foreign trade theories which include extensive margins, the number of exporting firms, the number of new trade partners, and the volume or variety of exported products. In brief, the growth of global trade is the result of new trade relations (extensive margin) or a rise in existing trade relations (intensive margin). As one of the rapidly developing trade theories in international economics, the main purpose of this study is to conduct a literature survey on the extensive and intensive margins of export growth.
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The study investigates the performance of the Greek economy in the field of goods exports during the past two decades, in the light of the role that the diversification/specialisation of the country's export portfolio may have played. The analysis uses detailed data on Greek exports of goods and key macroeconomic variables and other data concerning Greece and its trading partners, while also calculating suitable diversification/concentration indicators for the country’s goods exports, as well as relevant competitiveness indicators. Furthermore, the study conducts an empirical investigation of the relationship between product diversification/specialisation and export flows in the case of Greece. From the analysis of the evolution of the country’s goods exports in terms of products and on the basis of the relevant concentration index values, it seems that, especially during the period following the onset of the economic crisis, an important structural feature of Greece’s goods exports was the relatively high and rising degree of specialisation in specific product categories. In particular, the analysis points to an extremely high share and a large increase in exports of petroleum products, as well as a significant share and increase in exports in the sectors of pharmaceuticals, machinery, appliances, etc., aluminum products, plastics, electrical machinery, vegetable and fruit preparations, fruit and dairy products. On the contrary, exports decreased in the sectors of knitted garments, cotton, iron and steel, and articles of iron and steel. Despite the significant increase in exports of the manufacturing sector, the share of manufactured products in Greece's exports remains one of the lowest among Eurozone countries, while Greece also lags behind in relation to the level of technology of its industrial exports. With respect to the products of the agri-food sector, the country shows significant activity in the exports of products of protected geographical indication (PDO, PGI, GI). The analysis of the structure of Greece’s exports by geographical destination suggests that the Eurozone maintains a high and relatively stable share of the country’s goods exports, while the non-Eurozone countries of the EU and other European countries show a significant but declining share. In parallel, countries of the Middle East and South Asia show an increasing share in Greece’s total exports of goods. The assessment of the geographical dispersion of Greece’s goods exports, indicates a fairly high degree of diversification, which, in fact, strengthened slightly over the period under review due to the increasing participation of Middle Eastern and Asian countries in Greece’s export activity. The results of the empirical analysis indicate the importance of intensifying existing trade relations with each destination country, through the increase of exports of products that Greece already exports to each country. This conclusion does not diminish the importance of geographical diversification, i.e., the opening to new markets abroad.
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Οι εξαγωγικές επιδόσεις της χώρας έχουν προσελκύσει τα τελευταία χρόνια ιδιαίτερο ενδιαφέρον, τόσο σε επίπεδο οικονομικής ανάλυσης, όσο και σε επίπεδο οικονομικού σχεδιασμού και πολιτικής. Κατά τη διάρκεια της οικονομικής κρίσης, αλλά και στη μετέπειτα περίοδο της πανδημίας, οι εξαγωγές αγαθών της Ελλάδας παρουσίασαν ανοδική πορεία, παρά τις αντίξοες συνθήκες, δίνοντας σημαντική διέξοδο στον παραγωγικό τομέα και στηρίζοντας συνολικά την ελληνική οικονομία. Η παρούσα μελέτη επικεντρώνεται σε μια διάσταση των εξαγωγικών επιδόσεων, η οποία μέχρι στιγμής δεν έχει μελετηθεί επαρκώς για την περίπτωση της Ελλάδας. Η διάσταση αυτή σχετίζεται με τον βαθμό στον οποίο οι εξαγωγές αγαθών τείνουν με την πάροδο του χρόνου να εμφανίζουν μεγαλύτερο βαθμό διαφοροποίησης, δηλαδή διεύρυνσης στην γκάμα των εξαγόμενων προϊόντων/εξαγωγικών προορισμών, ή αντίθετα μεγαλύτερο βαθμό συγκέντρωσης σε συγκεκριμένες αγορές και προϊόντα, όπως λ.χ. αγαθά στα οποία η χώρα διατηρεί συγκριτικά πλεονεκτήματα έναντι των ανταγωνιστών της. Η μελέτη διερευνά τις επιδόσεις της χώρας στον τομέα των εξαγωγών αγαθών κατά την τελευταία εικοσαετία, υπό το πρίσμα του ρόλου που μπορεί να έχει διαδραματίσει στις επιδόσεις αυτές η εξέλιξη της διαφοροποίησης/εξειδίκευσης του εξαγωγικού χαρτοφυλακίου της. Στην ανάλυση χρησιμοποιούνται λεπτομερή δεδομένα των εξαγωγών αγαθών της Ελλάδας και βασικά μακροοικονομικά μεγέθη και άλλα στοιχεία που αφορούν την Ελλάδα και τους εμπορικούς της εταίρους, ενώ υπολογίζονται κατάλληλοι δείκτες του βαθμού διαφοροποίησης/συγκέντρωσης των εξαγωγών και δείκτες αποκαλυπτόμενου συγκριτικού πλεονεκτήματος. Επιπλέον γίνεται εμπειρική διερεύνηση της σχέσης μεταξύ της διαφοροποίησης/εξειδίκευσης και των εξαγωγικών ροών για την περίπτωση της Ελλάδας. Από την ανάλυση της εξέλιξης των εξαγωγών αγαθών της Ελλάδας σε επίπεδο προϊόντων και τον υπολογισμό των σχετικών δεικτών συγκέντρωσης φαίνεται ότι, ιδιαίτερα κατά την περίοδο που ακολούθησε την αρχή της οικονομικής κρίσης, σημαντικό δομικό χαρακτηριστικό των ελληνικών εξαγωγών αγαθών αποτέλεσε η ύπαρξη σχετικά υψηλού και αυξανόμενου βαθμού εξειδίκευσης σε συγκεκριμένες κατηγορίες προϊόντων. Ειδικότερα, παρουσιάζεται εξαιρετικά υψηλό μερίδιο και μεγάλη αύξηση των εξαγωγών στα πετρελαιοειδή προϊόντα, καθώς επίσης και σημαντική συμμετοχή και αύξηση των εξαγωγών στους κλάδους των φαρμακευτικών προϊόντων, των μηχανών, συσκευών κ.ά., των προϊόντων αλουμινίου, των πλαστικών, των ηλεκτρικών μηχανημάτων, των παρασκευασμάτων διατροφής από λαχανικά και φρούτα, των φρούτων και των γαλακτοκομικών προϊόντων. Αντίθετα, μείωση εξαγωγών σημειώθηκε στον κλάδο των πλεκτών ενδυμάτων, του βαμβακιού, του χυτοσίδηρου, του σίδηρου και χάλυβα και των συναφών προϊόντων. Παρά τη σημαντική αύξηση των εξαγωγών του μεταποιητικού τομέα, το μερίδιο της μεταποίησης στις εξαγωγές της Ελλάδας παραμένει ένα από τα χαμηλότερα μεταξύ των χωρών της Ευρωζώνης, ενώ παρουσιάζεται και υστέρηση σε σχέση με το επίπεδο τεχνολογίας των βιομηχανικών εξαγωγών της χώρας. Στα προϊόντα του αγροδιατροφικού τομέα, η Ελλάδα εμφανίζει σημαντική δραστηριότητα στις εξαγωγές προϊόντων προστατευόμενης γεωγραφικής ένδειξης (ΠΟΠ, ΠΓΕ, ΓΕ). Η ανάλυση της διάρθρωσης των εξαγωγών ανά γεωγραφική ζώνη δείχνει ότι η Ευρωζώνη διατηρεί υψηλό και σχετικά σταθερό μερίδιο των εξαγωγών αγαθών της Ελλάδας, ενώ οι εκτός Ευρωζώνης χώρες της ΕΕ και οι λοιπές ευρωπαϊκές χώρες εμφανίζουν σημαντική αλλά μειούμενη συμμετοχή. Παράλληλα, οι χώρες της Μέσης Ανατολής και της Νότιας Ασίας σημειώνουν αύξηση μεριδίου στις εξαγωγές της Ελλάδας. Ο βαθμός γεωγραφικής διαφοροποίησης των εξαγωγών εμφανίζεται υψηλός, και μάλιστα ενισχύθηκε ελαφρά στην πορεία της εξεταζόμενης περιόδου λόγω της αύξησης της συμμετοχής των χωρών της Μέσης Ανατολής και της Ασίας στην εξαγωγική δραστηριότητα της Ελλάδας. Τα αποτελέσματα της εμπειρικής ανάλυσης αναδεικνύουν τη σημασία της εντατικοποίησης των υφιστάμενων εμπορικών σχέσεων, μέσα από την ανάπτυξη των εξαγωγών σε προϊόντα τα οποία η Ελλάδα ήδη εξάγει στην εκάστοτε χώρα. Το συμπέρασμα αυτό δεν υποβαθμίζει τη σημασία της γεωγραφικής διαφοροποίησης, η οποία είναι συμβατή με την ενίσχυση του βαθμού συγκέντρωσης των προϊόντων εντός των αγορών προορισμού.
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Recent trade disruptions and their consequences on supply chains show the importance of stable trade relations for exporters' economic planning and importers' supply security. Both instability in trading partners' economic and institutional environment and differences between them are likely to exacerbate these disruptions. We investigate the role of exporters' institutional quality (IQ) and its similarity with importers' IQ in the stability of trade links. We focus on the trade links of agri‐food products exported from sub‐Saharan African (SSA) countries to the European Union (EU‐28) and consider three dimensions of IQ: ‘government selection, monitoring, and replacement’; ‘efficiency of policy formulation and implementation’; and ‘respect of citizens and state for institutions’. Using a discrete‐time duration model, we show that the duration of SSA exports to the EU‐28 increases with higher exporters' IQ and similarity of trading partners' IQ. The strongest impact of exporters' IQ is associated with ‘government selection, monitoring, and replacement’. In terms of the similarity of trading partners, ‘respect of citizens and state for institutions’ has the largest impact on trade durations. Our findings suggest that the improvement of countries' IQ may boost the stability of trade relationships. Moreover, the similarity of IQs between trading partners supports the stability of trade links and should be carefully considered when establishing new trade relations.
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In the radically new economic conditions of 2020, the Government of the Russian Federation selected supporting non-resource and non-energy exports as one of the four factors of sustainable economic growth. Achieving this target is a challenge, but the absence of sufficient conditions for a systemic diversification of Russian exports also poses a substantial problem. This situation lends urgency to developing a methodology for the normative institutional reflection of non-resource non-energy targets in regional legislative acts. This article aims to improve the methods for embedding non-resource non-energy export targets in regional strategies (the targets are expected to serve as an institutional factor prompting economic diversification). This research is exploratory; methodologically, it stands out for using qualitative and quantitative content analysis with elements of computer-assisted frequency analysis of legislative acts and regulations. The study classifies, for the first time, the non-resource non-energy export targets, contributing to the regional export strategy theory. Analysis of strategies for socio-economic development confirmed the hypothesis that, in some north-western Russian regions, the priorities and targets of non-resource non-energy exports are at odds with federal law. The practical implication of this study is recommendations on adapting strategies for regional socio-economic development to the updated non-resource non-energy export targets.
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On the basis of CEPII-BACI trade data from 2001 to 2018, this study examined the impact of technology innovation on the duration of China’s manufacturing export competitiveness by using the discrete time model. Results showed that the innovation behaviour can effectively improve the duration of export competitiveness of the manufacturing industry. An increase in the innovation input by 1% can reduce the risk of decline in manufacturing export competitiveness by 9.3%, and an increase in innovation intensity by 1% can increase the duration of manufacturing export competitiveness by 6.4%. Evidence on innovation output also supports this conclusion.
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El principal objetivo de este documento es analizar el tipo de diversificación comercial logrado por las empresas atuneras mexicanas como resultado de los embargos impuestos por Estados Unidos en la década de los 80’s y la negativa del etiquetado Dolphin Safe para los productos mexicanos de atún enlatado. Los acontecimientos que dieron origen a la guerra comercial entre México y Estados Unidos fueron: 1) el fortalecimiento de la industria atunera mexicana, 2) la disputa sobre las 200 millas de la Zona Económica Exclusiva (ZEE) Mexicana, y 3) la victoria de Ronald Reagan en las elecciones estadounidenses de 1980. Los resultados de esta investigación indican que este sector se diversificó en el margen extensivo, es decir, ingresando a nuevos mercados; sin embargo, no lograron sobrevivir en esos mercados. La tecnología Blockchain puede ayudar a la sobrevivencia de estos mercados, automatizando los procesos aduaneros, siendo estos muy engorrosos.
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This paper surveys the recent body of work in economics on the importance of global value chains (GVCs) in shaping international trade flows and production patterns. On the empirical front, we begin by reviewing the “macro approach” to measuring the relevance of global production sharing in the world economy, while also offering a critical evaluation of the datasets (namely, World Input-Output Tables) that have been used to date to perform this value added accounting. We next discuss a “micro approach” that has instead employed firm-level datasets to document the ways in which firms have sliced up their value chains across countries. On the theoretical front, we propose an analogous dissection of the literature. First, we review a vast body of work developing country- and industry-level quantitative frameworks that are easily calibrated with World Input-Output Tables, and that shed light on the aggregate consequences of GVCs. Second, we overview micro-level frameworks that have treated firms rather than countries or industries as the relevant unit of analysis, and that have unveiled a number of mechanisms that are distinct from traditional models by which GVCs shape international trade flows. We close this survey with a discussion of a still infant literature on the desirability and effects of trade policy in a world of GVCs.
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This study contributes to the existing literature by empirically analyzing the impacts of the Belt and Road Initiative (BRI) on China’s bilateral trade. Applying an augmented gravity model to trade flows between China and its 190 trading partners, of which 140 countries have signed the BRI agreements sequentially, during the period 2012–2020, we find that: (1) The BRI can significantly increase the extensive and intensive margins of China’s exports and imports, while reducing China’s trade surplus. (2) The BRI stimulates trade quantities, while lowering unit values of traded products. (3) These effects vary by income level and product category. In short, the BRI has been quite effective in strengthening China’s global trade position and it is also beneficial to both trading parities. Policy implications are proposed accordingly.
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Over the past few decades, China’s exports have grown at a phenomenal pace. Using a firm–product–destination-level database from 2000 to 2016, this article analyzes the microlevel mechanisms underlying changes in the growth of China’s local export from the perspective of export relationship dynamics. To identify the impact of each kind of export dynamics, we decompose export growth into three distinct aspects: entry, incumbent, and exit. We break down China’s export growth along various dimensions and find that entry of new export relationships is the biggest force driving rapid export growth, but the quality of these entry relationships is far lower than the market average. We further analyze industrial restructuring and spatial restructuring of entry relationships. By estimating the correlation coefficient between the quality of the export relationship and the entry relationship, we demonstrate the need to increase the quality of entry relationships. The findings suggest that the entry relationship is pivotal to understanding the changing export geography, and it is imperative to change from traditional competition on quantity to nonquantity competition on quality upgrading.
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This study uses annual customs transaction data (HS six‐digit) for the period 2006–2018 to analyse the impact of average tariffs on the export sales, margins and survival of firms in Kenya. Results from the fixed‐effects regression model reveal that a 1% increase in tariffs reduces exports by 0.181% and the intensive margin by 0.183% but does not affect the extensive margin. Meanwhile, the cloglog fixed‐effects duration model reveals that a 1% increase in tariffs reduces export survival by 2.7%. This suggests that cutting tariffs, possibly through trade agreements, can help firms and countries improve their export performance.
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We use individual-investor data from Denmark to study whether women prefer pension schemes with lower financial risk due to a guaranteed return over those offering more uncertain market-based return. Guaranteed-return schemes provide less risky but also lower expected returns. We study both the extensive (whether women have lower tendency to invest in market-based schemes) and the intensive margin (how much more women invest in schemes with guaranteed return). We find women less likely to invest in riskier pension schemes, and those women who do, invest lower amounts compared to men. This contributes to inequality between men and women during retirement.
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La croissance économique des pays d’Afrique subsaharienne après leur indépendance s’est fondée sur les exportations des matières premières, surtout d’origine agricole, en vertu de la théorie de l’avantage absolu et comparatif et surtout de l’existence d’un marché mondial. En vue d’analyser ou de mesurer l’impact de la diversification internationale sur la croissance économique ivoirienne, nous procéderons à une analyse de sa politique commerciale avant 1980. Ensuite, nous examinons, l’effet de sa politique commerciale sur ses échanges commerciaux de 1980 à 2012, date importante dans l’histoire de l’évolution de la Côte d’ivoire. Le recours aux instruments de mesure caractéristiques de l’indice de Theil nous permet de montrer que la politique de diversification menée par la Côte d’Ivoire a un effet relativement moyen sur la croissance de ses exportations. Ce résultat suggère la mise en place d’une politique soutenue de transformation structurelle de l’économie ivoirienne.
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International economic integration has brought high growth to international trade while promoting economic development for many countries around the world. However, in recent times, in the world, there has appeared a trend opposite to trade liberalization, which is protectionism. Advocates for trade protection provide arguments for why countries implement trade-restrictive measures. Those causes are related to national security and defense, solving the trade deficit, creating jobs, protecting the nascent industry and ensuring fair trade. Countries are currently using tariff measures including import and export tariffs, and non-tariff measures. The article studies protectionism, analyzes the impact of trade protectionism by tariffs on Vietnam’s GDP and exports, and makes policy recommendations for the Government of Vietnam.
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The prediction that the effect of geographic distance as a barrier for trade will decrease over time and eventually be eliminated as a result of technological developments has been proposed for decades. However, empirical evidence suggests the negative effect of geographic distance persists in both international and domestic trade. This study uses data from a national survey of nursery and greenhouse growers in the United States to investigate the effect of geographic distance on trade. We model trades as a two‐step process in which selling firms and buyers were matched first, and then a positive trade flow occurs conditional on the match. This process leads to a simple zero‐inflated estimation strategy and provides a meaningful interpretation of the zero‐trades. We demonstrate that this approach predicts the overall trade flow better than the Poisson or Gamma Pseudo Maximum Likelihood (PML) approach, due to its ability to predict zero trade flows more accurately. The empirical results indicate the effect of distance on trade volume is large and statistically significant. In addition, firms trade almost exclusively with partners in the home state or in states with branch offices. We find that social media and website advertising is much less effective in increasing the trade flow than traditional advertising channels. [EconLit Citations: Q17, Q13].
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Products and firms are homogeneous in traditional foreign trade theories; products show no horizontal or vertical differentiation. It is observed that growth in exports is only related to an increase in export quantity and that this is not decomposed into margins. Since Melitz's work, there has been an increase in studies that decompose the firms' heterogeneity and export growth in foreign trade into extensive and intensive margins. The concepts are addressed in the literature known as “new-new” foreign trade theories which include extensive margins, the number of exporting firms, the number of new trade partners, and the volume or variety of exported products. In brief, the growth of global trade is the result of new trade relations (extensive margin) or a rise in existing trade relations (intensive margin). As one of the rapidly developing trade theories in international economics, the main purpose of this study is to conduct a literature survey on the extensive and intensive margins of export growth.
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Este artículo analiza la incidencia de los tratados de libre comercio (TLC) sobre la duración de las exportaciones en Colombia. Con datos a nivel de firma-producto-destino se estimaron modelos de duración en tiempo discreto que permitieron identificar que los TLC inciden negativamente en la probabilidad de cese de las relaciones comerciales activas antes de la entrada en vigor del acuerdo, sin embargo, aumentan el riesgo de salida de aquellas que comienzan después del acuerdo. Este doble efecto es robusto para distintos tipos de productos e, incluso, para exportaciones con certificado de origen. No obstante, las incursiones de firmas que cuentan con al menos un año de experiencia en el sector exportador comportan mayores perspectivas de duración. Se concluye que el rol del aprendizaje y del conocimiento adquirido es clave en el propósito de lograr un mejor aprovechamiento de los acuerdos y maximizar las probabilidades de éxito de las incursiones en los países con TLC.
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The purpose of the article is to investigate the reasons for the decline in trade activity between China and Japan, considering the fact that China is the largest source of Japanese agricultural products imports. Agricultural products trade plays an important role in the economic and trade relations between China and Japan, and the proportion of China's agricultural products exports to Japan's exports is increasing year by year. However, after 2013, China's agricultural exports to Japan have shown a downward trend year by year. What are the reasons for this change in trade? What is the structure of China's agricultural exports to Japan? This is a problem that must be understood. This article uses the HS4 quantile code data of China's agricultural exports to Japan from 2010 to 2019 by the United Nations Commodity Trade Statistics Database (UN Comtrade), and applies the binary marginal decomposition method to analyze China's agricultural exports to Japan. The results show that China's agricultural exports to Japan In export growth, the marginal contribution of expansion is weak, while the marginal contribution of intensive is larger. After further decomposing the intensive margin into the quantity margin and the price margin, it is found that the growth of China's agricultural exports to Japan is mainly due to the rapid growth of the quantity margin, while the price margin does not contribute much to export growth. In the future, if China wants to expand its exports of agricultural products to Japan, it must become familiar with and adapt to the access standards of the Japanese market as soon as possible, increase the added value of agricultural products, and enhance the comprehensive competitiveness of agricultural exports to Japan.
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This paper contributes to the literature discussing the effects of the European Cohesion Policy (ECP) on recipients’ foreign direct investment (FDI). Unlike previous studies, we closely examine the ECP effects not only on total FDI but also on both the extensive and intensive FDI margins. The analysis on the EU 28 countries, conducted using system GMM estimation, suggests ECP plays a role in promoting FDI on the extensive margin only. Moreover, the ECP’s positive marginal effect on total FDI is neutralized in the Central and Eastern European (CEE) countries, implying an increase in their attractiveness through other ways than implementing market-oriented structural reforms.
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A recent body of work has shown that quality of national institutions that enforce written contracts plays an important role in shaping a country’s comparative advantage. The current paper contributes to this literature by providing a comprehensive analysis of the mechanisms through which institutional frictions affect the pattern of aggregate trade flow by distinguishing its effect on the intensive and extensive margins. We find that better contracting institutions not only increase the probability of exporting (the extensive margin) but also enhance the export sales after entry (the intensive margin), particularly in industries where relationship-specific investments are most important. With around two-third to three-fourth share (depending on the definition used), the contribution of institutions along the intensive margin dominates that along the extensive margin. The benefits of improved institutions, particularly via the intensive margin, favor the less developed countries over the more developed ones. In addition, better contracting institutions increase the probability of survival of export products in more contract-intensive industries in particular. These findings are robust to measuring the intensive and extensive margins using a more granular export data based on firm-level aggregates, as well as the variety and destination based definitions.
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In this study, we use a gravity model to investigate the relationship between exports and sudden, prolonged increases in economic growth. Our main contribution is we decompose exports into the extensive and intensive margins when considering this relationship. Using the definition of takeoffs in a country's growth process from Aizenman & Spiegel, we identify 142 economic growth takeoffs. We find that the extensive margin is an important mechanism for export growth and, ultimately, economic growth. We also find evidence that exports increase significantly immediately before, and during, a growth episode, with the extensive margin being entirely responsible for the observed increase in exports. Finally, we find that developing countries see a larger percentage point increase in the extensive margin and decrease in the intensive margin during a takeoff. These results suggest that takeoffs may spur a reduction in the fixed costs to exporting, which propel an increase in the extensive margin. Therefore, export diversification appears to be a potential policy option for those seeking to increase the chances of a growth takeoff in their country, and takeoffs seem to present an opportunity for further export diversification.
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Abstract Using transactions-level customs data from Colombia, we study …rm-speci…c export patterns over the period 1996-2005. Our data allow us to track …rms’entry and exit into and out of individual destination markets, as well as their revenues from selling there. We …nd that, in a typical year, nearly half of all Colombian,exporters were not exporters in the previous year. These new exporters tend to be extremely small in terms of their overall contribution to export revenues, and most do not continue exporting,in the following year. Hence export sales are dominated,by a small number,of very large and stable exporters. Nonetheless, out of each cohort of new exporters, a fraction of …rms go on to expand their foreign sales very rapidly, and over the period of less than a decade, these successful new exporters account for almost half of total export expansion. Finally, we …nd that new exporters begin in a single foreign market and, if they survive, gradually expand into additional destinations. The geographic expansion paths they follow, and their likelihood of survival as exporters, depend on their initial destination market. 1,Introduction Research in international trade, both theoretical and quantitative, is increasingly focussed
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Using a novel dataset with transactions level exports data from four African countries (Malawi, Mali, Senegal and Tanzania), this paper uncovers evidence of a high degree of experimentation at the extensive margin associated with low survival rates, consistent with high and middle income country evidence. Consequently, the authors focus on the questions of what determines success and survival beyond the first year and find that survival probability rises with the number of firms exporting the same product to the same destination from the same country, pointing towards the existence of cross-firm synergies. Accordingly the evidence is consistent with the hypothesis that those synergies may be driven by information spillovers. More intuitively and consistently with multi-product firms models, the analysis also finds that firms more diversified in terms of products, but even more in terms of markets, are more likely to be successful and survive beyond the first year.
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Successful export growth and diversification require not only entry into new export products and markets but also the survival and growth of export flows. For a cross-country dataset of product-level bilateral export flows, exporting is found to be a perilous activity, especially in low-income countries. Unobserved individual heterogeneity in product-level export flow data prevails even when a wide range of observed country and product characteristics are controlled for. This questions previous studies that used the Cox proportional hazards model to analyze export survival. Following Meyer (1990), a Prentice-Gloeckler (1978) model is estimated, amended with a gamma mixture distribution summarizing unobserved individual heterogeneity. The empirical results confirm the significance of a range of product- as well as country-specific factors in determining the survival of new export flows. Important for policymaking is the finding of the value of learning-by-doing for export survival: experience with exporting the same product to other markets or different products to the same market is 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. Copyright The Author 2010. Published by Oxford University Press on behalf of the International Bank for Reconstruction and Development / the world bank . All rights reserved. For permissions, please e-mail: journals.permissions@oup.com, Oxford University Press.
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This paper analyze the survival of developing countries exports using the methodology developed by Rajan and Zingales (1998). An exporter faces multiple obstacles when entering new markets: imperfect information about the market, quality requirements of the importing countries, trade and marketing costs etc. Only firms with sufficient financial resources and high productivity can enter the international market. (Melitz 2003; Chaney 2005; Berman 2009). Therefore, one can expect exporters from a country with a well functioning financial markets to survive longer than exporters from a country where the financial markets are underdeveloped. In particular, we check if the exports of industries heavily dependent on external finance survive longer in foreign markets when produced in countries with developed financial system.
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The literature on the correlation between exports and economic development runs deep into the history of economic thought and permeates policy debates. This paper studies the microeconomic structure of export growth in Costa Rica, with special emphasis on the extensive margin of trade, encompassing new exporting firms, new products, and new export markets, as well as the unit values of new versus incumbent products. The data suggest that few new firms survive the test of exporting -- more than 40 percent of firms exit export activities after one year -- and this firm turnover is associated with a steady deterioration of export unit values (prices). Furthermore, most new export products are associated with product switching by incumbent exporting firms. The typical new product introduced by incumbent firms tended to be priced at about 90 percent of the unit values of incumbent products. In contrast, the usual suspected obstacles to export growth, such as the inability of small firms to enter exporting activities or to grow their exports, appear to be important sources of export growth. In fact, the smallest exporting firms experienced the fastest growth in their export values. Some of these results are compared withthose from other countries that have been examined in related literature.
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This paper examines firm entry and survival in exporting, and in products and markets not previously served by any domestic exporters. The authors use data on the nontraditional agriculture sector in Peru, which grew seven-fold from 1994 to 2007. They find tremendous firm entry and exit in the export sector, with exits more likely after one year and among firms that start small. There is also significant entry and exit in new markets. In contrast, such trial and error in new products is rare. New products are typically discovered by large experienced exporters and there is increased entry after products are discovered. The results imply that high sunk costs of entry are of concern for product discovery, especially for products that are not consumed domestically. In contrast, the tremendous entry and exit in exporting and in new markets suggests that initial sunk costs are relatively low. The authors develop a model that explains how entrepreneurs decide to export and to develop new export products and markets when there are sunk costs of discovery and uncertainty about idiosyncratic costs. The model explains many features of the data.
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We document the disappearance of numerous zeros in bilateral trade matrices since 1970. A novel decomposition of the growth of 23 developing economies’ exports during 1970-97 reveals that approximately one third of this growth can be accounted for by sales of long-standing exportables to new trading partners. Product-line econometric analyses suggest that such export growth is often enhanced by market size and proximity, and also by experience gained in the destination and proximate markets. Three measures of the proximity of a potential export destination to foreign markets that are already being supplied by an exporting nation are employed. Their significance indicates the presence of a path dependent process of geographical spread of exports.
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We examine the bilateral trade patterns of countries involved in significant trade liberalizations using detailed data on the value of trade flows by commodity. We find a striking relationship between a good's pre-liberalization share in trade and its growth subsequent to liberalization. The goods that were traded the least before the liberalization account for a disproportionate share in trade following the reduction of trade barriers. The set of goods that accounted for only 10 percent of trade before the liberalization may account for as much as 40 percent of trade following the liberalization. This new finding cannot be accounted for by the standard models of trade, which rely on increases in previously traded goods to produce trade growth. We modify the standard Dornbusch-Fischer-Samuelson model of Ricardian trade to provide a model capable of delivering these new facts. Our specification improves on previous Ricardian models by providing a technology process that can be calibrated using data on intra-industry trade
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We develop a simple model of international trade with heterogeneous firms that is consistent with a number of stylized features of the data. In particular, the model predicts positive as well as zero trade flows across pairs of countries, and it allows the number of exporting firms to vary across destination countries. As a result, the impact of trade frictions on trade flows can be decomposed into the intensive and extensive margins, where the former refers to the trade volume per exporter and the latter refers to the number of exporters. This model yields a generalized gravity equation that accounts for the self-selection of firms into export markets and their impact on trade volumes. We then develop a two-stage estimation procedure that uses an equation for selection into trade partners in the first stage and a trade flow equation in the second. We implement this procedure parametrically, semiparametrically, and nonparametrically, showing that in all three cases the estimated effects of trade frictions are similar. Importantly, our method provides estimates of the intensive and extensive margins of trade. We show that traditional estimates are biased and that most of the bias is due not to selection but rather due to the omission of the extensive margin. Moreover, the effect of the number of exporting firms varies across country pairs according to their characteristics. This variation is large and particularly so for trade between developed and less developed countries and between pairs of less developed countries. (c) 2008 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology..
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World trade evolves at two margins. Where a bilateral trading relationship already exists it may increase through time (intensive margin). But trade may also increase if a trading bilateral relationship is newly established between countries that have not traded with each other in the past (extensive margin). We provide an empirical dissection of post-World-War-II growth in manufacturing world trade along these two margins. We propose a "cornersolutions-version" of the gravity model to explain movements on both margins. A Tobit estimation of this model resolves the so-called "distance-puzzle". It also finds more convincing evidence than recent literature that WTO-membership enhances trade.
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Not surprisingly, big countries trade more than small countries. In this paper we use data on shipments by 110 exporters to 59 importers in 5,000 product categories to ask: how? Do big countries trade larger quantities of a common set of goods (the intensive margin), a larger set of goods (the extensive margin), or higher quality goods? We find that the extensive margin accounts for two-thirds of the greater exports of larger economies, and one-third of the greater imports of larger economies. Richer countries export more units at higher prices. These calculations are useful for distinguishing features of trade models that correspond more or less well to the data. Models with Armington national product differentiation do not feature the extensive margin, and wrongly predict that greater output will be accompanied by worse terms of trade. 'Krugman' style models with firm level product differentation fare better, but must be modified to include quality differentiation and fixed costs of trading to match all of the facts. Estimates based on these modifications imply that differences in goods' quality could be the proximate cause of about 25% of country differences in real income per worker.
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By considering a model with identical firms, Krugman (1980) predicts that a higher elasticity of substitution between goods magnifies the impact of trade barriers on trade flows. In this paper, I introduce firm heterogeneity in a simple model of international trade. I prove that the extensive margin and the intensive margin are affected by the elasticity of substitution in exact opposite directions. When the distribution of productivity across firms is Pareto, the predictions of the Krugman model with representative firms are overturned: the impact of trade barriers on trade flows is dampened by the elasticity of substitution, and not magnified. (JEL F12, F13)
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Large economies export more in absolute terms than do small economies. We use data on shipments by 126 exporting countries to 59 importing countries in 5,000 product categories to answer the question: How? Do big economies export larger quantities of each good (the intensive margin), a wider set of goods (the extensive margin), or higher-quality goods? We find that the extensive margin accounts for around 60 percent of the greater exports of larger economies. Within categories, richer countries export higher quantities at modestly higher prices. We compare these findings to some workhorse trade models. Models with Armington national product differentiation have no extensive margin, and incorrectly predict lower prices for the exports of larger economies. Models with Krugman firm-level product differentiation do feature a prominent extensive margin, but overpredict the rate at which variety responds to exporter size. Models with quality differentiation, meanwhile, can match the price facts. Finally, models with fixed costs of exporting to a given market might explain the tendency of larger economies to export a given product to more countries.
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International trade patterns at the product level are surprisingly dynamic. The majority of trade relationships exist for just a few, often only two to four, years. In this paper, I examine empirically the duration in German import trade at the 8-digit product level from 1995 to 2005. I find that survival probabilities are affected by product type, exporter characteristics and market structure. Specifically, I show that the duration of exporting a product to Germany is longer for differentiated products, for products with a low elasticity of substitution, for products obtained from a large exporter that is geographically close to the German market, and for products in markets with increasing import demand.
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Using transactions-level customs data from Colombia, we study firm-specific exporting patterns over the period 1996-2005. Our data allow us to track firms’ entry and exit into and out of individual destination markets, as well their revenues from selling there. Our results support findings from previous work: Exporters are very heterogeneous in terms of their size and the number of destinations where they sell. Since previous studies have not been able to use data on firms entering and leaving individual export markets, they have been unable to study patterns of entry and exit. The panel data in the current study provide information on how exports by individual firms to specific destinations evolve over time. While many firms enter and exit from exporting, these firms tend to be small in terms of their overall contribution to export revenues. Export sales are dominated by a small number of very large and stable exporters. In terms of the life cycle of exporting firms, most entering firms leave after one year of exporting. A small minority go on to become stable incumbents.
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This paper examines how country, industry, and firm characteristics interact in general equilibrium to determine nations' responses to trade liberalization. When firms possess heterogeneous productivity, countries differ in relative factor abundance, and industries vary in factor intensity, falling trade costs induce reallocations of resources both within and across industries and countries. These reallocations generate substantial job turnover in all sectors, spur relatively more creative destruction in comparative advantage industries than in comparative disadvantage industries, and magnify ex ante comparative advantage to create additional welfare gains from trade. The improvements in aggregate productivity as countries liberalize dampen and can even reverse the real-wage losses of scarce factors.
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Three potential consequences of trade liberalisation are often argued to take place: (1) an increase in aggregate productivity, (2) an expansion of the most productive …rms and (3) an exit of the least productive …rms. In recent years much research within trade has taken place on this phe- nomenon, mainly due to Melitz (2003). He designed a model in which intraindustry reallocation of production achieves these three results. This paper utilises a natural experiment to test this model as well as alterna- tive models. The experiment in question is the construction of a bridge connecting Malmö in Sweden with Copenhagen in Denmark across the Öresund Strait (previously only connected through a ferry link). The pa- per …nds evidence for an increase in aggregate productivity, an expansion of the most productive …rms and an increased likelihood for the most productive …rms to become exporters due to the increase in trade that took place after the bridge was opened. It fails to show evidence for an exit of the least productive …rms as well as for alternative theories in the literature.
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We document the disappearance of numerous zeros in bilateral trade matrices since 1970. A novel decomposition of the growth of 23 developing economies' exports during 1970-97 reveals that approximately one third of this growth can be accounted for by sales of long-standing exportables to new trading partners. Product-line econometric analyses suggest that such export growth is often enhanced by market size and proximity, and also by experience gained in the destination and proximate markets. Three measures of the proximity of a potential export destination to foreign markets that are already being supplied by an exporting nation are employed. Their significance indicates the presence of a path dependent process of geographical spread of exports.
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We examine the extent to which product differentiation affects duration of US import trade relationships. The results are consistent with a matching model of trade formation. Using highly disaggregated product level data we estimate the hazard rate is at least 23% higher for homogeneous goods than for differentiated products. The results are not only highly robust but are often strengthened under alternative specifications. As the smallest relationships are dropped, differences across product types increase. Controlling for potential measurement errors also results in larger differences across product types.
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In the presence of uncertainty about what a country can be good at producing, there can be great social value to discovering costs of domestic activities because such discoveries can be easily imitated. We develop a general-equilibrium framework for a small open economy to clarify the analytical and normative issues. We highlight two failures of the laissez-faire outcome: there is too little investment and entrepreneurship ex ante, and too much production diversification ex post. Optimal policy consists of counteracting these distortions: to encourage investments in the modern sector ex ante, but to rationalize production ex post. We provide some informal evidence on the building blocks of our model.
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With disaggregate tariff data we study the impact of changing tariffs on the range of goods countries export to the United States. Our probits with country and good effects show tariffs tend to have a statistically significant but small impact: at best 5% of the increasing extensive margin for 1989–1999 and 12% for 1996–2006 is explained by tariff reductions. This suggests the extensive margin has not amplified the impact of tariffs on trade flows to such an extent that the relatively moderate tariff reductions since WW II can explain the strong growth of world trade.
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We face uncertainty in most economic decisions we take. This is particularly true in the case of a firm entering a foreign market where there is uncertainty about the size of the market, the distribution channels, the adequacy of the firm's product to local tastes, etc. Despite its obvious importance, this ingredient appears to have been largely overlooked by the literature explaining the direction and volume of international trade flows. We incorporate this informational uncertainty into a model with heterogeneous firms similar to the one proposed by Melitz (2003). The model exhibits informational externalities that arise via informational complementarities: in markets with less uncertainty, the most productive firms always find optimal to enter. Once a firm enters that foreign market, her success/failure reveals information to other domestic firms who, given the new information, optimally decide whether to enter. We characterize the conditions under which, given initial entry, informational externalities are strong enough to reach an equilibrium with full information. The model delivers an explanation for the recent dynamic evolution of trade flows, at the intensive margin at the country level and the extensive margin at the firm/product level. The model also provides insights on the persistence of bilateral trade flows, zero trade flows, and why we observe empirically less entrance by small firms than the Melitz model predicts.
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This paper develops a dynamic industry model with heterogeneous firms to analyze the intra‐industry effects of international trade. The model shows how the exposure to trade will induce only the more productive firms to enter the export market (while some less productive firms continue to produce only for the domestic market) and will simultaneously force the least productive firms to exit. It then shows how further increases in the industry's exposure to trade lead to additional inter‐firm reallocations towards more productive firms. The paper also shows how the aggregate industry productivity growth generated by the reallocations contributes to a welfare gain, thus highlighting a benefit from trade that has not been examined theoretically before. The paper adapts Hopenhayn's (1992a) dynamic industry model to monopolistic competition in a general equilibrium setting. In so doing, the paper provides an extension of Krugman's (1980) trade model that incorporates firm level productivity differences. Firms with different productivity levels coexist in an industry because each firm faces initial uncertainty concerning its productivity before making an irreversible investment to enter the industry. Entry into the export market is also costly, but the firm's decision to export occurs after it gains knowledge of its productivity.
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This paper presents a dynamic model of the export decision by a profit-maximizing firm. UsingapanelofU.S.manufacturingplants, we test for the role of plant characteristics, spillovers from neighboring exporters, entry costs and government export promotion expenditures. Entry and exit in the export market by U.S. plants is substantial, past exporters are apt to reenter, and plants are likely to export in consecutive years. However, we find that entry costs are significant and spillovers from the export activity of other plants negligible. State export promotion expenditures have no significant effect on the probability of exporting. Plant characteristics, especially those indicative of past success, strongly increase the probability of exporting as do favorable exchange rate shocks.
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This paper exploits product-level U. S. import data to test trade theory. Although the United States increasingly sources the same products from both high- and low-wage countries, unit values within products vary systematically with exporter relative factor endowments and exporter production techniques. These facts reject factor-proportions specialization across products but are consistent with such specialization within products. The data are inconsistent with new trade theory models predicting an inverse relationship between price and producer productivity. The existence of within-product specialization is an important consideration for understanding the impact of globalization on firms and workers, the evolution of total factor productivity, and the likelihood of long-run income convergence.
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More than half of all US import relationships begin with less than $10,000 annually. The median relationship is observed to last just one year. The incidence and duration of import relationships are consistent with a search model of international trade. The preponderance of small starting relationships reveals uncertainty present in the formation of trade relationships. Initial size, reliability, and search costs play an important role. Larger initial purchase results in longer relationships. Higher reliability and lower search costs lead to larger initial purchases and longer relationships. Copyright © 2008 The Author. Journal compilation © 2008 Blackwell Publishing Ltd.
Article
I develop a new theory of marketing costs and introduce it into a model of trade with product differentiation and firm productivity heterogeneity. In this model, a firm enters a market if it makes profits by reaching a single consumer there and pays an increasing marginal cost to access additional consumers. This market penetration cost introduces an extensive margin of new consumers in firms' sales. I calibrate the key parameters of the model to match data on French firms from Eaton, Kortum and Kramarz, in particular the higher sales in France of firms that choose to export to more destinations. The model predicts that most firms do not export, and that a large proportion of firms that export in particular markets do so in small amounts. These predictions are in line with the French data, but together create a puzzle for models with a fixed cost of exporting, such as those of Melitz and Chaney. Looking at the comparative statics of trade liberalization, I find that the model predicts large increases in trade in goods with positive but little previous trade, in line with Kehoe and Ruhl. The model implies that these increases can contribute to new trade significantly more than the corresponding increases due to new exporters.
Article
We employ survival analysis to study the duration of U.S. imports. Our findings indicate international trade is far more dynamic than previously thought. The median duration of exporting a product to the U.S. is very short, on the order of two to four years. There is negative duration dependence. If a country is able to survive in the exporting market for the first few years it will face a very small probability of failure and will likely export the product for a long period of time. The results hold across countries and industries and are robust to aggregation. JEL classification: F14, F19, C14, C41 Entrées, sorties et la durée du commerce. Les auteurs emploient une analyse de survie pour étudier la durée des importations aux Etats-Unis. On découvre que le commerce international est beaucoup plus dynamique qu’on le pensait. La durée médiane de l’exportation d’un produit aux Etats-Unis est très courte – de l’ordre de deux à quatre ans. Il y a une dépendance négative de la durée. Si un pays est capable de survivre dans le marché d’exportation pour les quelques premières années, il fera face à une plus faible probabilité de faillite et va exporter le produit en toutes probabilités pendant une longue période. Ces résultats sont confirmés transversalement pour des ensembles de pays et d’industries et sont robustes quand on utilise des données agrégées.
Article
This paper develops a dynamic industry model with heterogeneous firms to analyze the intra-industry effects of international trade. The model shows how the exposure to trade will induce only the more productive firms to enter the export market (while some less productive firms continue to produce only for the domestic market) and will simultaneously force the least productive firms to exit. It then shows how further increases in the industry's exposure to trade lead to additional inter-firm reallocations towards more productive firms. The paper also shows how the aggregate industry productivity growth generated by the reallocations contributes to a welfare gain, thus highlighting a benefit from trade that has not been examined theoretically before. The paper adapts Hopenhayn's (1992a) dynamic industry model to monopolistic competition in a general equilibrium setting. In so doing, the paper provides an extension of Krugman's (1980) trade model that incorporates firm level productivity differences. Firms with different productivity levels coexist in an industry because each firm faces initial uncertainty concerning its productivity before making an irreversible investment to enter the industry. Entry into the export market is also costly, but the firm's decision to export occurs after it gains knowledge of its productivity. Copyright The Econometric Society 2003.
How important is the new goods margin in international trade? Federal Reserve Bank of Minneapolis Research Department Staff
  • Timothy J Kehoe
  • Kim J Ruhl
Kehoe, Timothy J., Ruhl, Kim J., 2009. How important is the new goods margin in international trade? Federal Reserve Bank of Minneapolis Research Department Staff Report 324.
Market penetration costs and the new consumers margin in international trade. NBER Working Paper Comparative advantage and heterogeneous firms
  • Arkolakis
  • Costas
Arkolakis, Costas, 2008. Market penetration costs and the new consumers margin in international trade. NBER Working Paper, 14214. Bernard, Andrew B., Redding, Stephen J., Schott, Peter K., 2007. Comparative advantage and heterogeneous firms. Review of Economic Studies 74 (1), 31–66.
Financial dependence and intensive margin of trade. Paris School of Economics Working Paper
  • Jaud
  • Mélise
  • Kukenova
  • Madina
  • Strieborny
  • Martin
Jaud, Mélise, Kukenova, Madina, Strieborny, Martin, 2009. Financial dependence and intensive margin of trade. Paris School of Economics Working Paper 2009-35.
Uncertainty and entry into export markets. Bank of Spain Working Paper
  • Segura-Cayuela
  • Rubén
  • Vilarrubia
  • M Josep
Segura-Cayuela, Rubén, Vilarrubia, Josep M., 2008. Uncertainty and entry into export markets. Bank of Spain Working Paper, 0811.