Fields of Interest: International Trade, Applied Microeconomics, Development
Learning, Externalities, and Export Dynamics
Abstract: Using transaction-level Chilean export data, I estimate the effect of incumbent exporter presence within disaggregate product-destination markets on new exporters along three margins: entry into new markets, the quantity of output sold, and the duration of trade spells. Signals about market conditions in general, and demand more specifically, revealed by incumbent firms have statistically and economically significant effects on new entrants in terms of these three margins: a one standard deviation increase in the signal revealed by incumbents increases entry rates by 3.8%, first-year sales by 9.8%, and export spell duration by 0.8%. Using a falsification exercise to rule out competing explanations, I show that the results are driven by entrants learning about demand by observing incumbent firms and the signals they reveal. The effects of these signals are larger in countries which are further away from Chile, in countries where Spanish is not an official language, and for less differentiated products. Understanding and quantifying these heterogeneous spillovers are vital to efficiently allocating export promotion resources.
JEL Classifications: D83, F14, L15
Keywords: Uncertainty, learning about demand, export dynamics, spillovers
Works in Progress:
Import Sourcing and Learning from Others