Institutions and Export Dynamics

53 Pages Posted: 1 Mar 2012

See all articles by Luis F. Araujo

Luis F. Araujo

Michigan State University - Department of Economics

Giordiano Mion

University of Sussex

Emanuel Ornelas

Sao Paulo School of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: January 2012


We study the role of contract enforcement in shaping the dynamics of international trade at the firm level. We develop a theoretical model to describe how agents build reputations to overcome the problems created by weak enforcement of international contracts. We find that, all else equal, exporters start their activities with higher volumes and remain as exporters for a longer period in countries with better contracting institutions. However, conditional on survival, the growth rate of a firm's exports to a country decreases with the quality of the country's institutions. We test these predictions using a rich panel of Belgium exporting firms from 1995 to 2008 to every country in the world. We adopt two alternative empirical strategies. In one specification we use firm-year fixed effects to control for time-varying firm-specific characteristics. Alternatively, we model selection more explicitly with a two-step Heckman procedure using

Keywords: Contract enforcement;, Contracting institutions, Firm dynamics, Firm exports

JEL Classification: F10, F12, L14

Suggested Citation

Araujo, Luis Fernando and Mion, Giordiano and Ornelas, Emanuel, Institutions and Export Dynamics (January 2012). CEPR Discussion Paper No. DP8809, Available at SSRN:

Luis Fernando Araujo (Contact Author)

Michigan State University - Department of Economics ( email )

101 Marshall Hall
East Lansing, MI 48824
United States
517-355-7583 (Phone)
517-432-1068 (Fax)

Giordiano Mion

University of Sussex ( email )

Emanuel Ornelas

Sao Paulo School of Economics ( email )

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

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