The Role of Extensive and Intensive Margins and Export Growth

24 Pages Posted: 8 Oct 2010

See all articles by Tibor Besedes

Tibor Besedes

Georgia Institute of Technology

Thomas J. Prusa

Rutgers University

Multiple version iconThere are 2 versions of this paper

Date Written: August 16, 2010

Abstract

We investigate and compare countries' export growth based on their performance at the extensive and intensive export margins. Our empirical approach is motivated by an extension to the Melitz (2003) model of heterogeneous firms in which exporters are subject to a one-time sunk cost and also a per-period fixed cost. With imperfect information a firm may enter export markets but shortly exit when it learns its per-period fixed costs. We apply this insight to disaggregated export data and confirm that indeed most export relationships are very short lived. We then show that the survival issue is a significant factor in explaining differences in long run export performance. We find that developing countries would experience significantly higher export growth if they were able to improve their performance with respect to the two key components of the intensive margin: survival and deepening.

Keywords: Extensive Margin, Intensive Margin, Export Survival

JEL Classification: F10, F14, O12

Suggested Citation

Besedes, Tibor and Prusa, Thomas J., The Role of Extensive and Intensive Margins and Export Growth (August 16, 2010). Journal of Development Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1689043

Tibor Besedes (Contact Author)

Georgia Institute of Technology ( email )

221 Bobby Dodd Way
Atlanta, GA 30332-0615
United States

Thomas J. Prusa

Rutgers University ( email )

Dept of Economics
75 Hamilton St
New Brunswick, NJ 08901
United States
848-932-8646 (Phone)
732-932-7416 (Fax)

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