What Explains the Low Survival Rate of Developing Country Export Flows?

Abstract

Successful export growth and diversification require not only entry into new export products and markets but also the survival and growth of export flows. For a crosscountry dataset of product-level bilateral export flows, exporting is found to be a perilous activity, especially in low-income countries. Unobserved individual heterogeneity in product-level export flow data prevails even when a wide range of observed country and product characteristics are controlled for. This questions previous studies that used the Cox proportional hazards model to analyze export survival. Following Meyer (1990), a Prentice-Gloeckler (1978) model is estimated, amended with a gamma mixture distribution summarizing unobserved individual heterogeneity. The empirical results confirm the significance of a range of product-as well as countryspecific factors in determining the survival of new export flows. Important for policymaking is the finding of the value of learning-by-doing for export survival: experience with exporting the same product to other markets or different products to the same market is found to strongly increase the chance of export survival. A better understanding of such learning effects could substantially improve the effectiveness of export promotion strategies. Export survival, Cox proportional hazard, low-income countries. JEL codes: F10, F14, C41 In a seminal study, Besedes and Prusa (2006b) conclude that for developing countries the key element in achieving faster aggregate export growth is higher survival rates for existing trade flows. Brenton, Pierola, and von Uexkull (2009) show that poorly performing developing countries are not inferior to stronger performing countries in introducing new trade flows but that these countries

Does participation in global value chains extend export duration?

“…For China, it is argued that the mean value of export duration is less than 2 years (Chen, Li, & Zhou, ; Shao et al., ). Similar results hold for Germany (Nitsch, ), Peru (Volpe‐Martincus & Carballo, ), and other developing countries (Brenton, Saborowski, & Von Uexkull, ). In a situation like this, how to maintain export relationships and extend export duration has become a matter of great concern to economic growth.…”

Importações brasileiras: Um estudo empírico sobre duração e fatores de sobrevivência

“…entre 1972 e 2001, utilizando-se de modelos econométricos de duração. Incorpora-se no presente trabalho a abordagem de modelos de duração adicionais, como sugerido por Brenton, Saborowski & von Uexkull (2010).…”

“…Os resultados foram que o fluxo nestes países é ainda menor, com duração média de um ano, e que as importações de países que são mais diversificados em termos de exportação apresentam um menor risco de interrupção. Brenton et al (2010) seguiram o mesmo raciocínio de análise de Besedes & Prusa (2006a, 2006b), porém observaram os fluxos de comércio sob a ótica exportadora de 44 países no período de 1985 a 2006. Os autores estimam modelos de duração e enfatizam a importância de se considerar a presença de heterogeneidade não observável nos dados de comércio.…”

Manufacturing servitisation and duration of exports in China

“…Besede s and Blyde (2010) use SITC 4-digit trade data from Latin America to draw the similar conclusions that short-lived trade duration exists in Latin America and that the trade survival rate is significantly lower than in America, Europe and Eastern Asia by, respectively, 11%, 5% and 6%. Brenton et al (2010Brenton et al ( ) use disaggregated 1985Brenton et al ( -2005 trade data from 82 developing countries to study trade duration and find only one-third duration spells are longer than 5 years. Moreover, a large number of researchers find that incumbent and sustained trade relations have more contribution to a country's export success (Brenton & Newfarmer, 2007;Brenton et al, 2010).…”

“…Brenton et al (2010Brenton et al ( ) use disaggregated 1985Brenton et al ( -2005 trade data from 82 developing countries to study trade duration and find only one-third duration spells are longer than 5 years. Moreover, a large number of researchers find that incumbent and sustained trade relations have more contribution to a country's export success (Brenton & Newfarmer, 2007;Brenton et al, 2010). Meanwhile, the literature has put in the effort to explain short-lived trade duration and finds that economic size, cultural proximity and geographic ties are important determinants of trade survival (Besede s & Prusa, 2006a;Brenton et al, 2010;Nitsch, 2009).…”