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Venting Out: Exports During a Domestic Slump

Miguel Almunia (), Pol Antras, David Lopez-Rodriguez and Eduardo Morales

No 25372, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We exploit plausibly exogenous geographical variation in the reduction in domestic demand caused by the Great Recession in Spain to document the existence of a robust, within-firm negative causal relationship between demand-driven changes in domestic sales and export flows. Spanish manufacturing firms whose domestic sales were reduced by more during the crisis observed a larger increase in their export flows, even after controlling for firms’ supply determinants (such as labor costs). This negative relationship between demand-driven changes in domestic sales and changes in export flows illustrates the capacity of export markets to counteract the negative impact of local demand shocks. We rationalize our findings through a standard heterogeneous-firm model of exporting expanded to allow for non-constant marginal costs of production. Using a structurally estimated version of this model, we conclude that the firm-level responses to the slump in domestic demand in Spain could well have accounted for around one-half of the spectacular increase in Spanish goods exports (the so-called ‘Spanish export miracle’) over the period 2009-13.

JEL-codes: F12 F14 F62 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int
Date: 2018-12
Note: ITI
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