FIRM‐LEVEL INVESTMENT AND EXPORT DYNAMICS*

Youngwoo Rho and Joel Rodrigue

International Economic Review, 2016, vol. 57, issue 1, 271-304

Abstract: This article characterizes the complementarity between exporting and investment in physical capital. We argue that new investment allows young exporters to grow faster and survive longer in export markets while reducing their vulnerability to productivity or demand shocks across markets. We structurally estimate our model using detailed firm‐level data. We find that the choice of cost structure has a large impact on model performance and the estimated costs of exporting or investment. Using detailed capital and output tariff rates, we quantify the impact of policy change on aggregate export and investment growth.

Date: 2016
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