The ABCs of Firm Heterogeneity: The Effects of Demand and Cost Differences on Exporting

Bernardo S Blum, Sebastian Claro, Ignatius Horstmann, David A Rivers

Research output: Contribution to journalArticle

Abstract

We develop a novel methodology for disentangling the demand and cost drivers of firm heterogeneity. Our specific focus is on export status differences, and we utilize a new data set containing firm-product information on prices and quantities sold in the domestic and each export market. Our methodology allows us to jointly estimate firm-level productivity and markups in every market while imposing no functional form restrictions on demand. We find that i) exporters have thicker domestic markets than non-exporters; ii) this advantage translates to foreign markets; and iii) while all firms face a trade-off between lowering costs and enhancing demands, export firms achieve demand increases with much less loss in productivity.
Original languageAmerican English
Pages (from-to)1-70
Number of pages70
JournalWorking Paper
StatePublished - 2018

Keywords

  • Amil Petrin
  • Daniel Trefler
  • Demand
  • Exporting
  • F12
  • L11 * We thank Dan Ackerberg
  • Markups
  • Productivity JEL codes: F10
  • Victor Aguirregabiria
  • and Frederic Warzynski for help-ful comments

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