Export Decision under Risk

Carl Gaigne, Anne-Célia Disdier and José De Sousa ()

No 1272, 2015 Meeting Papers from Society for Economic Dynamics

Abstract: Does demand volatility matter for exports? How do exporting firms deal with skewed demand? A simple model of risk aversion shows that exporters react to an increase in demand volatility in destination markets by increasing their export prices and decreasing their export volumes. In sharp contrast, exporters decrease prices and increase volumes when demand skewness rises. We also show that the moments of the distribution of demand affect the extensive margin of trade. These theoretical predictions are put to the test by using French firm-level exports across destination markets with different levels of demand volatility and skewness. The firm-level results, over the period 2000-2009, are broadly consistent with our predictions.

Date: 2015
New Economics Papers: this item is included in nep-bec, nep-int and nep-upt
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Citations: View citations in EconPapers (3)

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