Export market diversification and productivity improvements: theory and evidence from Argentinean firms
Luciana Juvenal () and
Paulo Santos Monteiro ()
No 2013-015, Working Papers from Federal Reserve Bank of St. Louis
This paper examines the relationship between trade and investment in technology adoption when firms face demand uncertainty. Our model predicts that, for a given overall market size, exporting to several countries reduces firms' demand uncertainty and, hence, raises incentives to invest in productivity improvements. The effects of diversification are heterogeneous across firms: An additional foreign market matters more for firms exporting to fewer destinations. We test the proposed theory using a large sample of Argentinean manufacturing exporters. The predictions of the model find strong support in the data.
Keywords: Trade; Technology - Economic aspects; Argentina (search for similar items in EconPapers)
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