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Volatility and diversification of exports: firm-level theory and evidence

Vannoorenberghe, Gonzague; Wang, Zheng; Yu, Zhihong

Authors

Gonzague Vannoorenberghe

Zheng Wang

Zhihong Yu



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 a priori 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 small exporters, a more diversified pool of destinations makes the firm more likely to export occasionally to some markets, thereby raising export volatility.

Journal Article Type Article
Publication Date 2016-10
Journal European economic review
Print ISSN 0014-2921
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 89
Issue October
Pages 216-247
APA6 Citation Vannoorenberghe, G., Wang, Z., & Yu, Z. (2016). Volatility and diversification of exports: firm-level theory and evidence. European Economic Review, 89(October), (216-247). doi:10.1016/j.euroecorev.2016.07.002. ISSN 0014-2921
DOI https://doi.org/10.1016/j.euroecorev.2016.07.002
Keywords Volatility; Diversification; Exports
Publisher URL http://www.sciencedirect.com/science/article/pii/S0014292116301210
Copyright Statement ©2018, Elsevier. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
Additional Information This is the accepted manuscript of an article published in European economic review, 2016. The version of record is available at the DOI link in this record.

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Copyright Statement
©2018, Elsevier. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/





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