The ABCs of Firm Heterogeneity: The Effects of Demand and Cost Differences on Exporting

  • Blum B
  • Claro S
  • Horstmann I
  • et al.
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Abstract

We develop a novel methodology for disentangling the demand and cost drivers of firm heterogeneity. Our specific focus is on export status differences, and we utilize a new data set containing firm-product information on prices and quantities sold in the domestic and each export market. Our methodology allows us to jointly estimate firm-level productivity and markups in every market while imposing no functional form restrictions on demand. We find that i) exporters have thicker domestic markets than non-exporters; ii) this advantage translates to foreign markets; and iii) while all firms face a trade-off between lowering costs and enhancing demands, export firms achieve demand increases with much less loss in productivity.

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APA

Blum, B. S., Claro, S., Horstmann, I., & Rivers, D. A. (2018). The ABCs of Firm Heterogeneity: The Effects of Demand and Cost Differences on Exporting. Working Paper, 1–70.

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