The Role of Extensive and Intensive Margins and Export Growth
24 Pages Posted: 8 Oct 2010
Date Written: August 16, 2010
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: Suggested Citation