Fixed Export Costs and Export Behavior

Abstract

This paper provides a direct test of how fixed export costs and productivity jointly determine firm-level export behavior. Using Chilean data, we construct indices of fixed export costs for each industry-region-year triplet and match them to domestic firms. Our empirical results show that firms facing higher fixed export costs are less likely to export, while those with higher productivity export more. These outcomes are the foundation of the widely-used sorting mechanism in trade models with firm heterogeneity. A particularly novel finding is that high-productivity nonexporters face greater fixed export costs than low-productivity exporters. We also find that the substitution between fixed export costs and productivity in determining export decisions is weaker for firms with higher productivity. Finally, both larger fixed export costs and greater within-triplet productivity dispersion raise the export volume of the average exporter.JEL codes: F10, F12, F14.

Inspection, testing errors and trade in tainted products

“…A recent paper by Castro et al (2014) assumes an explicit sorting mechanism: for a given level of fixed costs, firms with a low productivity do not export, and for a given productivity, firms with high fixed export costs do not export either. In our setup, one could think of the local firm as having faced some sort of high entry barriers before entering the home market, making it unable to recover the additional fixed cost of exporting.…”

Ingresos externos corrientes de Colombia: desempeño exportador, avances y retos

“…No obstante, un mejor funcionamiento institucional y una menor protección expresada en un menor peso regulatorio no son suficientes para lograr reducir los costos de comerciar; estas mejoras deben acompañarse de una buena infraestructura y calidad en la prestación de servicios logísticos para potenciar la ventaja comparativa de los bienes producidos por un país (Sicra, 2008;Castro et al, 2014). Colombia tiene serias fallas en estos dos componentes.…”

Market Efficiency, Heterogeneous Trade Costs and Export‐Only Firms

“…Empirical micro‐level investigations have also been conducted widely (Wagner, , ; Thomas and Narayanan, 2012). A few published studies have focused on the joint effect of fixed export costs and productivity on firm‐level export behaviour (Jorgensen and Schroder, , Castro et al , ) and the influence of country efficiency on firm performance (Montagna, ; Falvey et al , ). A sorting mechanism based on variable and fixed costs associated with exports can be used to explain the self‐selection effect on international trade.…”

“…Assumes that fixed trade costs are borne by exporters and, based on this assumption, he recalculates the tax equivalent of proportional trade costs. Castro et al () also point out that fixed export costs usually vary across firms and they are related to industrial and regional characteristics. Wang and Zhao () also mention that spillovers from exports play a crucial role in the geographic expansion of export destinations, which implies that export experience can be considered as an important factor affecting fixed export costs.…”