Internalization of Externalities in International Trade

Jamal Haidar ()

MPRA Paper from University Library of Munich, Germany

Abstract: Using disaggregated customs data about exporters from nine countries, I demonstrate that informational externalities are determinants of entry, survival, and growth of exporters at the product–destination market level. I show that exporters who optimize entry decisions and internalize informational externalities survive longer and grow faster. Then, I conceptualize why exporters enter certain international markets and why not all exporters from the same origin survive and grow in these markets. I incorporate the interaction between the performance and number of peers in a given market to identify a potential learning externality that exporters may be exposed to. Also, I highlight that, even without the formation of formal networks, the observation of the actions of peers in export markets can deliver implications for export flows: exporters may not need to start small in new markets if the actions of peers in those markets reveal enough information. By helping to explain how export relationships survive and grow, I complement the literature on the determinants of export diversification and signal to export promotion agencies the importance of internalization of informational externalities by exporters.

Keywords: exporters dynamics; peer effects; informational externalities; market entry; diversification; trade; development (search for similar items in EconPapers)
JEL-codes: F1 F10 F11 F14 (search for similar items in EconPapers)
Date: 2021-09-01
New Economics Papers: this item is included in nep-cwa and nep-int
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Journal Article: Internalization of externalities in international trade (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:111935

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