Exploring the duration of EU imports

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The objective of this paper is twofold. First, against the background of an existing empirical literature on the duration of trade which has found that international trade is often of strikingly short duration, we aim to establish whether or not EU imports from the rest of the world also are short-lived. Second, since there is at this point no clear commonly accepted theoretical explanation for these short trade durations, we seek to provide a thorough empirical description and analysis of the phenomenon, with the intention of thereby facilitating theoretical developments on the subject. We employ a rich data set of detailed imports to the EU15 countries from 140 exporters, covering the time period 1962-2006. Using these data, we begin by conducting a thorough descriptive analysis of the duration of EU imports. Thereafter, we perform a regression analysis using discrete-time duration models with proper controls for unobserved heterogeneity. We draw the conclusion that EU imports are indeed very short-lived -in fact, possibly more so than, for example, US imports. The median duration of EU imports is for example merely one year, and almost 60 percent of all spells cease during the first year of service. Among our empirical findings are (i) that the duration of trade remains stable across the long time period that we study; (ii) that short trade durations are the result of at least two processes: countries shifting between different suppliers but continuing to import a given product, and countries ceasing to import the product altogether; and (iii) that countries with a diversified export structure also will tend to have more long-lived export flows. In our formal regression, we are also able to find a set of explanatory variables that have statistically significant effects on the probability that trade flows die. Terms of use: Documents in

How to combine high sunk costs of exporting and low export survival

“…Interestingly, if we increase the level of aggregation so that we consider products defined at the 6-digit or even 4-digit levels, the same pattern remains: almost all spells are very short-lived. This finding, which corresponds to similar findings using country-level data in, for instance, Hess and Persson (2011), suggests that the observed short durations are not some data artefact but indeed capture a relevant economic phenomenon.…”

“…Prusa, 2011, Hess andPersson 2011), since changed market variables reflect changes in the expected pay-offs of export activity. We include the GDP of each export destination since it will influence the expected revenue of that market through increased competition on a larger market as well as through a greater export opportunity (this ambiguity is discussed in Melitz and Ottaviano, 2008).…”

“…Using both country-and firm-level data, it has found clear evidence that trade flows on average have very low survival rates. For instance, Hess and Persson (2011), using bilateral country-product-level imports for EU countries, suggest a median duration of merely one year. Other papers, employing country data and similarly finding short durations include Besedeš and Prusa (2006a, 2006b, Besedeš (2008Besedeš ( , 2011, Nitsch (2009), Fugazza andMolina (2009) and Brenton et al (2010).…”

A Discrete Time Analysis of Export Duration in Kenya: 1995-2014

“…Comparative advantage is taken as the opportunity cost a country foregoes in producing a specific commodity as opposed to another country even though it possess absolute advantage in all lines of production. The theory 13 Refer to studies such as Besedes et al, ( (2011) ; Hess et al, (2011Hess et al, ( ,2012and Arawomo (2015). 14 This includes theories from Smith's Absolute Advantage to Ricardo's Comparative Advantage and the HecksherOhlin theory to the New Trade Theory 15 Absolute disadvantage is when a country finds it costly to produce a product with the available level of labour of factor endowment 16 (Heckscher-Ohlin) states that a country will export a commodity which it is more endowed in and import that which it is less endowed in.…”

“…This benchmark study generated a great deal of interest among researchers and results in other countries have confirmed that trade is indeed short-lived (all medians), 2 years in Germany (Nitsch, 2009), 1-2 years for 46 developing countries (Besedeš and Prusa, 2011) and only about 20% of Kenyan exports survive past the first year (Kinuthia, 2014). Subsequently, (Hess and Persson, 2011) found the median import duration in the U.S between 1962 and 2006 to be 1 year.…”