Does Domestic Demand Matter for Firms’ Exports?

Paulo Esteves, Miguel Portela () and António Rua ()
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Miguel Portela: NIPE/Universidade do Minho, Braga, Portugal & IZA
António Rua: Banco de Portugal & NOVA School of Business and Economics

Open Economies Review, 2022, vol. 33, issue 2, No 4, 332 pages

Abstract: Abstract The existence of a link between exports and domestic demand challenges the standard theoretical assumption in international trade models and carries out important policy implications. In our empirical setup the estimated relationship between exports and domestic sales results directly from a monopolistic model of a firm selling to both domestic and external markets. We find a noteworthy negative relationship between domestic sales and firms’ exports covering the manufacturing sector over the period 2009 – 2016. This result holds for almost all industries although with a heterogeneous magnitude. Additionally, there is also evidence that this effect is stronger for larger firms.

Keywords: International trade; Firms; Exports; Domestic demand; Foreign demand; Panel data (search for similar items in EconPapers)
JEL-codes: C23 C26 D21 D22 F14 F41 (search for similar items in EconPapers)
Date: 2022
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Related works:
Working Paper: Does domestic demand matter for firms’ exports? (2018)
Working Paper: Does domestic demand matter for firms’ exports? (2018)
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DOI: 10.1007/s11079-021-09623-9

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