On export duration puzzles

Carl Gaigne, Bruno Larue and Wendkouni Jean-Baptiste Zongo

No 21-10, Working Papers SMART from INRAE UMR SMART

Abstract: We investigate two puzzles in the export duration literature. The first puzzle has to do with the frequent entries and exits of firms in export markets, which are at odds with the large fixed export costs in such markets. We introduce convex production technologies in a trade model to show how variable marginal costs create direct linkages between export markets. As fixed export costs vary across destinations, more productive firms need not necessarily export to more destinations. Cost convexity implies that the probability of supplying a given export market is adversely affected by positive export shocks in other markets. This is supported by our empirical analysis of bilateral flows for over 200 agri-food products to 176 destinations originating from six large exporting countries. The second puzzle has to do with the paradoxical effect of tariffs reported in empirical export duration studies. When endogeneity is addressed, tariffs increase the probability of an export failure.

Keywords: cost convexity; export failure; gravity (search for similar items in EconPapers)
JEL-codes: F12 F14 Q17 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2021
New Economics Papers: this item is included in nep-agr and nep-int
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http://ageconsearch.umn.edu/record/319672 (application/pdf)

Related works:
Journal Article: On export duration puzzles (2023)
Working Paper: On Export Duration Puzzles (2021)
Working Paper: On Export Duration Puzzles (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:rae:wpaper:202110

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