How Exporters Grow

Abstract

We document how export quantities and prices evolve after entry to a market. Controlling for marginal cost, and taking account of selection on idiosyncratic demand, there are economically and statistically significant dynamics of quantities, but no dynamics of prices. To match these facts, we estimate a model where firms invest in customer base through non-price actions (e.g. marketing and advertising), and learn gradually about their idiosyncratic demand. The model matches quantity, price and exit moments. Parameter estimates imply costs of adjusting investment in customer base, and slow learning about demand, both of which generate sluggish responses of sales to shocks.

Firm-to-Firm Relationships and the Pass-Through of Shocks: Theory and Evidence

“…I will test the latter explanation below, and develop a theory that incorporates both mechanisms. My findings are consistent with Fitzgerald et al (2016), who show that exporters gradually increase their sales into a new destination country. My results highlight that the pattern also holds for individual relationships.…”

Gravity and Extended Gravity: Using Moment Inequalities to Estimate a Model of Export Entry

“…23 Con- 22 Dickstein and Morales (2016) find that large firms have more information relevant to predict rijt than small firms, and their evidence suggests that this informational advantage is due to larger investments in acquiring information. Multiple papers provide evidence consistent with within-firm learning (Albornoz et al, 2012;Berman et al, 2015;Arkolakis et al, 2015b;Timoshenko, 2015a,b;Bastos et al, 2016;Fitzgerald et al, 2016).…”

Inflation Dynamics During the Financial Crisis

“…reflecting variation in quality and taste among consumers-are the principal reason why some firms succeed in the marketplace while others fail. In addition, as documented by Roberts et al (2012), Eaton et al (2015), and Fitzgerald et al (2016), customer markets considerations also importantly shape the pricing decision of exporting firms in both advanced and emerging market economies.…”