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.
File(s): File format is application/pdf http://research.stlouisfed.org/wp/2013/2013-015.pdf
Provider: Federal Reserve Bank of St. Louis
Part of Series: Working Papers
Publication Date: 2013