Did export promotion help firms weather the crisis?

Abstract

In the global recession of 2009, exports declined precipitously in many countries. We illustrate with firm-level data for Belgium and Peru that the decline was very sudden and almost entirely due to lower export sales by existing exporters. After the recession, exports rebounded almost equally quickly and we evaluate whether export promotion programs were an effective tool aiding this recovery. We show that firms taking advantage of this type of support did better during the crisis, controlling flexibly for systematic differences between supported and control firms. The primary mechanism we identify is that supported firms are generally more likely to survive on the export market and, in particular, are more likely to continue exporting to countries hit by the financial crisis. We would like to thank Carlos Salamanca Malagón and Victoria Valente for excellent research assistance, the National Bank of Belgium, FIT and PROMPERU for access to the Belgian and Peruvian data respectively, and Heather Booth di Giovanni for helpful suggestions. The views and interpretations in this paper are strictly those of the authors and should not be attributed to the Inter-American Development Bank, its executive directors, its member countries, the National Bank of Belgium, PROMPERU, or FIT. Executive SummaryThe academic literature as advanced and tested several explanations for the notable decline in the volume of international trade during the Great Recession of 2008-2009. Shocks to both demand and trade costs have been suggested as important channels. There has, however, been surprisingly little discussion how governments could help firms cope with the fallout from foreign demand or with the increase in trading frictions.In this paper we first document for Belgium and Peru that trade volumes rebounded remarkably quickly. By 2010 exports had regained their pre-crisis levels and by 2011 they were even back on the pre-crisis trend. Using firm-level information for both countries, we investigate whether export promotion programs played a role in this recovery. A growing literature has documented the success of such programs in raising exports in general and they could be a valuable tool to help the private sector recover from a large trade decline as well.Most countries now run active export promotion programs to facilitate domestic firms' entry into the export market and support subsequent export sales. Rather than provide direct subsidies, these programs work mainly as an information depository or a way to share fixed information acquisition costs between exporters. They help firms to learn about foreign demand for their products, establish relationships with importers, identify promising new distribution channels, and overcome administrative or trade frictions such as customs procedures and differences between domestic and foreign regulations or product standards.The evidence suggests export promotion has indeed been an effective tool to help firms survive on the export market. We show that firms active on the export ma...

Do subsidised export loans increase exports?

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