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Volatility and diversification of exports: firm level theory and evidence

Vannoorenberghe, Gonzague; Zheng, Wang; Yu, Zhihong

Authors

Gonzague Vannoorenberghe gonzague.vannoorenberghe@uclouvain.be

Wang Zheng z.wang@hull.ac.uk

ZHIHONG YU ZHIHONG.YU@NOTTINGHAM.AC.UK
Associate Professor



Abstract

We show using detailed firm-level Chinese data that, among small exporters, firms selling to a more diversified set of countries have more volatile exports, while the opposite holds among large exporters. This apriori surprising result for small firms is robust to a wide array of specifications and controls. Our theoretical explanation for these observations rests on the presence of fixed costs of exports per destination and short run demand shocks. In this setup , the volatility of a firm's exports depends not only on the diversification of its destination portfolio but also on whether it exports permanently to all markets. Among all exporters, a more diversified pool of destinations makes the firm more likely to export occasionally to some markets, thereby raising export volatility.

Citation

Vannoorenberghe, G., Zheng, W., & Yu, Z. (2016). Volatility and diversification of exports: firm level theory and evidence. European Economic Review, 89, (216-247). doi:10.1016/j.euroecorev.2016.07.002. ISSN 0014-2921

Journal Article Type Article
Acceptance Date Jul 8, 2016
Online Publication Date Jul 25, 2016
Publication Date Oct 30, 2016
Deposit Date Jul 27, 2016
Publicly Available Date Jul 26, 2018
Journal European Economic Review
Print ISSN 0014-2921
Electronic ISSN 0014-2921
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 89
Pages 216-247
DOI https://doi.org/10.1016/j.euroecorev.2016.07.002
Keywords Volatility; Diversification; Exports
Public URL http://eprints.nottingham.ac.uk/id/eprint/35456
Publisher URL http://www.sciencedirect.com/science/article/pii/S0014292116301210
Copyright Statement Copyright information regarding this work can be found at the following address: http://creativecommons.org/licenses/by-nc-nd/4.0

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Copyright Statement
Copyright information regarding this work can be found at the following address: http://creativecommons.org/licenses/by-nc-nd/4.0





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