Working Paper: NBER ID: w25372
Authors: Miguel Almunia; Pol Antràs; David López-Rodríguez; Eduardo Morales
Abstract: We exploit plausibly exogenous geographical variation in the reduction in domestic demand caused by the Great Recession in Spain to document the existence of a robust, within-firm negative causal relationship between demand-driven changes in domestic sales and export flows. Spanish manufacturing firms whose domestic sales were reduced by more during the crisis observed a larger increase in their export flows, even after controlling for firms’ supply determinants (such as labor costs). This negative relationship between demand-driven changes in domestic sales and changes in export flows illustrates the capacity of export markets to counteract the negative impact of local demand shocks. We rationalize our findings through a standard heterogeneous-firm model of exporting expanded to allow for non-constant marginal costs of production. Using a structurally estimated version of this model, we conclude that the firm-level responses to the slump in domestic demand in Spain could well have accounted for around one-half of the spectacular increase in Spanish goods exports (the so-called ‘Spanish export miracle’) over the period 2009-13.
Keywords: exports; domestic demand; Great Recession; Spain; vent-for-surplus
JEL Codes: F12; F14; F62
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Reduction in domestic demand (R22) | Domestic sales (F19) |
| Vehicle stock change (L92) | Local demand (R22) |
| Local demand (R22) | Domestic sales (F19) |
| Domestic sales (F19) | Export flows (Y10) |
| Reduction in domestic demand (R22) | Export flows (Y10) |