Volatility and Diversification of Exports: Firm-Level Theory and Evidence

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

No 4916, CESifo Working Paper Series from CESifo

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 result, which stands in marked contrast to standard portfolio theory for small exporters, 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 volatility. These results cast doubt on the commonly held belief that diversification must decrease volatility.

Keywords: volatility; diversification exports (search for similar items in EconPapers)
JEL-codes: F10 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp4916.pdf (application/pdf)

Related works:
Journal Article: Volatility and diversification of exports: Firm-level theory and evidence (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_4916

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().