Volatility and diversification of exports: Firm-level theory and evidence

Gonzague Vannoorenberghe, Zheng Wang () and Zhihong Yu ()

European Economic Review, 2016, vol. 89, issue C, 216-247

Abstract: We show using detailed firm-level Chinese data that, among small exporters, firms selling to a more diversified set of countries have more volatile exports, while the opposite holds among large exporters. This a priori surprising result for small firms is robust to a wide array of specifications and controls. Our theoretical explanation for these observations rests on the presence of fixed costs of exports per destination and short-run demand shocks. In this setup, the volatility of a firm's exports depends not only on the diversification of its destination portfolio but also on whether it exports permanently to all markets. Among small exporters, a more diversified pool of destinations makes the firm more likely to export occasionally to some markets, thereby raising export volatility.

Keywords: Volatility; Diversification; Exports (search for similar items in EconPapers)
JEL-codes: F1 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (35)

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Working Paper: Volatility and Diversification of Exports: Firm-Level Theory and Evidence (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:89:y:2016:i:c:p:216-247

DOI: 10.1016/j.euroecorev.2016.07.002

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