Overseas Trading Costs and Firm Export Performance

Globalisation, Productivity, and Technology Research Paper No. 2006/11

43 Pages Posted: 19 May 2006

See all articles by Richard Kneller

Richard Kneller

University of Nottingham

Mauro Pisu

OECD; Leverhulme Centre for Research on Globalisation and Economic Policy; National Bank of Belgium

Zhihong Yu

University of Nottingham - Leverhulme Centre for Research on Globalisation and Economic Policy (GEP)

Date Written: May 19, 2006

Abstract

The recent micro economic literature concerning exports has highlighted the importance of firms characteristics and trade costs for export decisions. Although the presence of trade costs (i.e. sunk and variable costs) are essential to describe the different export choices firms with different level of productivity make, little is known about them. The previous literature has concentrated mainly on the tariff barriers exporting firms face. The aim of this study is to provide evidence on a different aspect of trade costs, those of overseas trading costs.

Firstly, we model theoretically the effect of a reduction in the cost of doing business in foreign countries. Secondly, using a data set of UK manufacturing firms we test these predictions. Controlling for firm and industry level covariates we find that: 1) improvement in the business environment of foreign countries led to an increase in the export intensity of established exporters rather than additional export market entry; 2) the change in exports was almost exclusively explained by the reform took place within Europe; 3) multinationals responded disproportionately to these changes; 4) exports responded most to changes in the rules governing ownership, labour market regulation and international capital markets.

Keywords: Exports, Overseas transaction costs, Productivity; Multinationals

JEL Classification: D24 ,F14, F23

Suggested Citation

Kneller, Richard and Pisu, Mauro and Yu, Zhihong, Overseas Trading Costs and Firm Export Performance (May 19, 2006). Available at SSRN: https://ssrn.com/abstract=903281 or http://dx.doi.org/10.2139/ssrn.903281

Richard Kneller (Contact Author)

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom

Mauro Pisu

OECD ( email )

2 rue Andre Pascal
Paris Cedex 16, 75775
France

Leverhulme Centre for Research on Globalisation and Economic Policy ( email )

University of Nottingham
School of Economics
Nottingham, NG7 2RD
United Kingdom

National Bank of Belgium ( email )

Research Department
Boulevard de Berlaimont 14
Brussels, 1000
Belgium

Zhihong Yu

University of Nottingham - Leverhulme Centre for Research on Globalisation and Economic Policy (GEP) ( email )

University Park
Nottingham, NG7 2RD
United Kingdom

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