Export characteristics and output volatility: comparative firm-level evidence for CEE countries

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. Abstract: The literature shows that openness to trade improves long-term growth but also that it may increase exposure to high output volatility. In this vein, our paper investigates whether exporting and export diversification at the firm level have an effect on the output volatility of firms. We use large representative firm-level databases from Estonia, Hungary, Romania, Slovakia and Slovenia over the last boom-bust cycle in 2004-2012. The results confirm that exporting is related to higher volatility at the firm level. There is also evidence that this effect increased during the Great Recession due to the large negative shocks in export markets. In contrast to the literature and empirical findings for large or advanced countries we do not find a statistically significant and consistent mitigating effect from export diversification in the Central and Eastern European countries. In addition, exporting more products or serving more markets does not necessarily result in higher stability of firm sales. Terms of use: Documents in EconStor may Non-technical summaryThe ability to serve foreign markets is frequently associated with higher efficiency, growth or prosperity. However, several studies have confirmed that involvement in foreign trade tends to increase output volatility. The available macro-level evidence suggests that the higher volatility is a side-effect of the specialisation induced by rising trade and of the sector-specific shocks that dominate GDP volatility. More recent literature indicates that openness to trade does not increase volatility if trade is well diversified (see e.g. Bejan (2006) and Haddad et al. (2013)).We try to shed more light on the link between exporting, export diversification and output volatility using detailed firm-level data. The relatively scarce firm-level evidence available so far offers ambiguous conclusions. Buch et al. (2009) and Kurz and Senses (2015) find exporting to be related to lower volatility, while Vannoorenberghe (2012) and Nguyen and Schaur (2010) find exporting to be related to higher volatility. Our paper contributes to the literature by applying the exact same methodology to large representative firm-level databases from five countries. Data for manufacturing firms from Estonia, Hungary, Romania, Slovakia and Slovenia are used. These Central and Eastern European countries form a good case study as they have all experienced high volatility and openness, but have different diversification patterns.T...

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