Volatility and diversification of exports

Firm-level theory and evidence

Gonzague Vannoorenberghe*, Zheng Wang, Zhihong Yu

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

Abstract

We show using detailed firm-level Chinese data that, among small exporters, firms selling, to a more diversified set of countries have more volatile exports, while the opposite holds among large exporters. This a priori surprising result for small firms is robust to a wide array of specifications and controls. Our theoretical explanation for these observations rests on the presence of fixed costs of exports per destination and short-run demand shocks. In this setup, the volatility of a firm's exports depends not only on the diversification of its destination portfolio but also, on whether it exports permanently to all markets. Among small exporters, a more diversified pool of destinations makes the firm more likely to export occasionally to some markets, thereby raising export volatility. (C) 2016 Elsevier B.V. All rights reserved.

Original languageEnglish
Pages (from-to)216-247
JournalEuropean Economic Review
Volume89
DOIs
Publication statusPublished - Oct 2016

Keywords

  • Volatility
  • Diversification
  • Exports

Cite this

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title = "Volatility and diversification of exports: Firm-level theory and evidence",
abstract = "We show using detailed firm-level Chinese data that, among small exporters, firms selling, to a more diversified set of countries have more volatile exports, while the opposite holds among large exporters. This a priori surprising result for small firms is robust to a wide array of specifications and controls. Our theoretical explanation for these observations rests on the presence of fixed costs of exports per destination and short-run demand shocks. In this setup, the volatility of a firm's exports depends not only on the diversification of its destination portfolio but also, on whether it exports permanently to all markets. Among small exporters, a more diversified pool of destinations makes the firm more likely to export occasionally to some markets, thereby raising export volatility. (C) 2016 Elsevier B.V. All rights reserved.",
keywords = "Volatility, Diversification, Exports",
author = "Gonzague Vannoorenberghe and Zheng Wang and Zhihong Yu",
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Volatility and diversification of exports : Firm-level theory and evidence. / Vannoorenberghe, Gonzague; Wang, Zheng; Yu, Zhihong.

In: European Economic Review, Vol. 89, 10.2016, p. 216-247.

Research output: Contribution to journalArticleScientificpeer-review

TY - JOUR

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T2 - Firm-level theory and evidence

AU - Vannoorenberghe, Gonzague

AU - Wang, Zheng

AU - Yu, Zhihong

PY - 2016/10

Y1 - 2016/10

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AB - We show using detailed firm-level Chinese data that, among small exporters, firms selling, to a more diversified set of countries have more volatile exports, while the opposite holds among large exporters. This a priori surprising result for small firms is robust to a wide array of specifications and controls. Our theoretical explanation for these observations rests on the presence of fixed costs of exports per destination and short-run demand shocks. In this setup, the volatility of a firm's exports depends not only on the diversification of its destination portfolio but also, on whether it exports permanently to all markets. Among small exporters, a more diversified pool of destinations makes the firm more likely to export occasionally to some markets, thereby raising export volatility. (C) 2016 Elsevier B.V. All rights reserved.

KW - Volatility

KW - Diversification

KW - Exports

U2 - 10.1016/j.euroecorev.2016.07.002

DO - 10.1016/j.euroecorev.2016.07.002

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VL - 89

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EP - 247

JO - European Economic Review

JF - European Economic Review

SN - 0014-2921

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