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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

Abstract: 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)
Date: 2013
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