Working Paper

Export market diversification and productivity improvements: theory and evidence from Argentinean firms

Abstract: This paper examines the relationship between trade and investment in technology adoption when firms face demand uncertainty. Our model predicts that, for a given overall market size, exporting to several countries reduces firms' demand uncertainty and, hence, raises incentives to invest in productivity improvements. The effects of diversification are heterogeneous across firms: An additional foreign market matters more for firms exporting to fewer destinations. We test the proposed theory using a large sample of Argentinean manufacturing exporters. The predictions of the model find strong support in the data.

Keywords: Trade; Technology - Economic aspects; Argentina;

Bibliographic Information

Provider: Federal Reserve Bank of St. Louis

Part of Series: Working Papers

Publication Date: 2013

Number: 2013-015