How Exporters Grow

Fitzgerald, Doireann; Haller, Stephanie; Yedid-Levi, Yaniv

Report

How Exporters Grow

Abstract: We show that after firms enter new export markets, there are striking dynamics of quantities, but no dynamics of prices, controlling for both costs and selection. This points to an important role for demand in the growth of successful exporters, and to a nonprice mechanism through which quantity demanded grows. A model where firms engage in costly investment in customer base through marketing and advertising, and learn about their idiosyncratic demand, can qualitatively match these facts, along with a declining exit hazard. We structurally estimate the model and find that costs of adjusting customer base are key to explaining how exporters grow.

Keywords: Customer base; exporter dynamics; Firm dynamics;

JEL Classification: L10; E20; F10;