Working Paper: NBER ID: w29100
Authors: Jonathan Eaton; Marcela Eslava; David Jinkins; C J Krizan; James R Tybout
Abstract: Exporting abroad is much harder than selling at home, and overcoming hurdles to exporting takes time. Our goal is to identify specific barriers to exporting and to measure their importance. We develop a model of firm-level export dynamics that features costly customer search, network effects in finding buyers, and learning about product appeal. Fitting the model to customs records of U.S. imports of manufactures from Colombia we replicate patterns of exporter maturation. A potentially valuable intangible asset of a firm is its customer base and knowledge of a market. Our model delivers some striking estimates of what such assets are worth. Averaging across active exporters, the loss from total market amnesia (losing its current U.S. customer base along with its accumulated knowledge of product appeal) is US$ 3.4 million, about 34 percent of the value of exporting overall. About half is the loss of future sales to existing customers while the rest is the cost of relearning its appeal in the market and reestablishing visibility as an exporter. As finding buyers takes time, the 5-year response of total export sales to an exchange rate shock exceeds the 1-year response by about 40 percent, with the 1-year response reflecting mostly sales per exporter-importer match and the 5-year response, reflecting the number of matches almost as much as sales per match.
Keywords: Export Dynamics; Trade Costs; Firm-Level Evidence; Customer Search; Market Visibility
JEL Codes: F12; F14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Search Costs (D40) | Speed of Establishing Buyer-Seller Connections (L81) |
| Search Expenditure (H50) | Speed of Establishing Buyer-Seller Connections (L81) |
| Successful Sales (M31) | Future Search Efforts (Y50) |
| Failures (D52) | Future Search Efforts (Y50) |
| Visibility (Y91) | Cost of Finding Additional Buyers (D49) |
| Total Export Sales (F10) | Exchange Rate Shock Response (F31) |