The Micro Dynamics of Exporting: Evidence from French Firms

Abstract

The paper investigates the dynamics of export relationships – defined as shipments by a given firm to a given destination in a given year – in a panel of almost 25,000 French exporters over the five-year period 1995-1999. It describes how the relationships evolve over time, presenting a number of stylized facts that are related to various theories of export dynamics, such as a dynamic sunk-cost model and the recent literature on exporting and learning. We find that export relationships are highly dynamic: a large fraction are created or concluded every year, and the values within relationships fluctuate substantially. Most of these dynamics are explained by relationship-specific shocks, not supply or demand shocks. Also, export values are small at first but gradually increase as relationships mature. Finally, while many export relationships are volatile, others are persistent. Previous exports to a destination substantially increase a firm’s probability of making current exports there. Taken together, these facts correspond better to the learning than to the sunk-cost hypothesis.

Keywords: trade dynamics, extensive and intensive margin, firm heterogeneity

JEL Classification: F10, F12, F14