Working Paper: CEPR ID: DP18403
Authors: Alonso Ureña; Juanma Castrovincenzi; Sebastian Fanelli; Eduardo Morales
Abstract: We estimate a model of firm export dynamics featuring cross-country complementarities. The firm decides where to export by solving a dynamic combinatorial discrete choice problem, for which we develop a solution algorithm that overcomes the computational challenges inherent to the large dimensionality of its state space and choice set. According to our estimated model, firms enjoy cost reductions when exporting to countries geographically or linguistically close to each other, or that share deep trade agreements; and countries, especially small ones, sharing these traits with attractive destinations receive significantly more exports than in the absence of complementarities.
Keywords: export dynamics; integer programming problem; deep free trade agreements
JEL Codes: F12; F13; F14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| cost reductions when exporting to countries that are geographically or linguistically close or share deep trade agreements (F12) | increased export probabilities (F10) |
| cross-country complementarities (F12) | increase in the number of firm-country-year triplets with positive exports (F10) |
| cross-country complementarities (F12) | increase in total exports (F10) |
| geographical proximity (R12) | increase in exports (F10) |
| deep PTAs (P30) | increase in exports (F10) |
| linguistic proximity (Y80) | increase in exports (F10) |
| hypothetical Brexit scenario (F55) | decrease in total exports to the UK (F69) |
| hypothetical Brexit scenario (F55) | decrease in the number of exporters to the UK (F69) |
| signing PTAs to eliminate tariffs (F13) | increase in Costa Rican exports (F10) |
| cross-country complementarities (F12) | impact on EU exports (F69) |