Volatility and diversification of exports: Firm-level theory and evidence
Vannoorenberghe,Gonzague Wang,Zheng Yu,Zhihong
Vannoorenberghe,Gonzague
Wang,Zheng
Yu,Zhihong
Abstract
We show using detailed firm-level Chinese data that, among small exporters, firms selling, to a more diversified set of countries have more volatile exports, while the opposite holds among large exporters. This a priori surprising result for small firms is robust to a wide array of specifications and controls. Our theoretical explanation for these observations rests on the presence of fixed costs of exports per destination and short-run demand shocks. In this setup, the volatility of a firm's exports depends not only on the diversification of its destination portfolio but also, on whether it exports permanently to all markets. Among small exporters, a more diversified pool of destinations makes the firm more likely to export occasionally to some markets, thereby raising export volatility. (C) 2016 Elsevier B.V. All rights reserved.
Description
Date
2016-10
Journal Title
Journal ISSN
Volume Title
Publisher
Research Projects
Organizational Units
Journal Issue
Keywords
Volatility, Diversification, Exports, F1 - Trade
Citation
Vannoorenberghe, G, Wang, Z & Yu, Z 2016, 'Volatility and diversification of exports : Firm-level theory and evidence', European Economic Review, vol. 89, pp. 216-247. https://doi.org/10.1016/j.euroecorev.2016.07.002