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Export decision under risk

José de Sousa (), Anne-Célia Disdier and Carl Gaigne

European Economic Review, 2020, vol. 121, issue C

Abstract: We show that economic uncertainty in foreign markets affects firms’ economic decisions, particularly those of the most productive firms. Using export data at both the industry and firm levels, we uncover two empirical regularities. First, demand uncertainty in foreign markets affects export entry/exit decisions (extensive margin) and export sales (intensive margin). If all destination countries exhibited the lowest volatility observed across destinations, then total French exports would rise by approximately 18% (an increase primarily driven by the extensive margin). Second, the most productive exporters are more affected by a higher industry-wide expenditure volatility than are the least productive exporters. The 25% most productive firms export, on average, 27% more in value than the 25% least productive firms in less volatile markets, while this difference decreases to 12% in the most volatile markets.

Keywords: Firm exports; Demand uncertainty; Expenditure volatility; Skewness (search for similar items in EconPapers)
JEL-codes: D21 D22 F12 F14 (search for similar items in EconPapers)
Date: 2020
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Working Paper: Export decision under risk (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:121:y:2020:i:c:s0014292119302028

DOI: 10.1016/j.euroecorev.2019.103342

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