Sequential Exporting

45 Pages Posted: 29 Nov 2010

See all articles by Facundo Albornoz

Facundo Albornoz

University of Birmingham

Hector F. Calvo Pardo

University of Southampton - Economics Division

Gregory Corcos

Norwegian School of Economics (NHH) - Department of Economics

Emanuel Ornelas

Sao Paulo School of Economics

Date Written: November 2010

Abstract

Many new exporters give up exporting very shortly, despite substantial entry costs; others shoot up foreign sales and expand to new destinations. We develop a model based on experimentation to rationalize these and other dynamic patterns of exporting firms. We posit that individual export profitability, while initially uncertain, is positively correlated over time and across destinations. This leads to “sequential exporting,” where the possibility of profitable expansion at the intensive and extensive margins makes initial entry costs worthwhile despite high failure rates. Firm-level evidence from Argentina’s customs, which would be difficult to reconcile with existing models, strongly supports this mechanism. Importantly, sequential exporting has novel policy implications: a reduction in trade barriers has delayed effects, while also promoting entry in third markets. This trade externality poses challenges for the quantification of the effects of trade liberalization programs and implies that the consequences of international trade agreements are significantly richer than traditional models suggest.

Keywords: Experimentation, Export dynamics, Learning, Trade liberalization, Uncertainty

JEL Classification: D21, F10, F13

Suggested Citation

Albornoz, Facundo and Calvo Pardo, Hector F. and Corcos, Gregory and Ornelas, Emanuel, Sequential Exporting (November 2010). CEPR Discussion Paper No. DP8103. Available at SSRN: https://ssrn.com/abstract=1714875

Facundo Albornoz (Contact Author)

University of Birmingham ( email )

Economics Department
Birmingham, B15 2TT
United Kingdom

Hector F. Calvo Pardo

University of Southampton - Economics Division ( email )

University Rd.
Southampton SO17 1BJ, Hampshire SO17 1LP
United Kingdom
+442380595051 (Phone)
+442380593858 (Fax)

Gregory Corcos

Norwegian School of Economics (NHH) - Department of Economics ( email )

Helleveien 30
N-5035 Bergen
Norway

Emanuel Ornelas

Sao Paulo School of Economics ( email )

Rua Itapeva 474 s.1202
São Paulo, São Paulo 01332-000
Brazil

HOME PAGE: http://https://sites.google.com/site/emanuelornelaseo/

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