Foreign market conditions and export performance: Does 'crowdedness' reduce exports?

Abstract

This paper analyzes the link between firm exports and the competitive environment in foreign markets. We derive a theory-based econometric specification linking market-specific exports to foreign demand and the degree of a market's 'crowdedness,' which depends on the number and efficiency of firms competing there and the barriers impeding their access. Estimates on a large sample of Italian firms indicate that increased crowdedness has reduced Italian exports, but only by 0.2%-0.3% per year. This is substantially less than the contribution of other factors such as higher unit labour costs or weak demand growth in the EU15. © Canadian Economics Association.