Geography and the Determinants of Firm Exports in Indonesia

Abstract

This paper uses data from the Indonesian manufacturing census in order to uncover the determinants of firm exports over the period 1990-2005. We examine to what extent differences in firm export propensity and intensity are a consequence of firm-level (microeconomic), of place-based (macroeconomic) first- and second-nature geography characteristics, or of a combination of the two. The results indicate that both internal and external factors matter. Second-nature, rather than first-nature, geography makes an important difference. The conditions of a firm's province and those of neighboring provinces shape firm exports. Agglomeration effects, education and transport infrastructure endowment play a particularly relevant role in Indonesian firms' export propensity, while export spillovers increase export intensity.

Keywords: Asia, Export intensity, Export propensity, Geography, Indonesia, Macro-factors, Micro-factors

JEL Classification: F1, F2, R1