Determinants of Exports: Productivity or Fixed Export Costs

54 Pages Posted: 2 Sep 2014

See all articles by Young Gui Kim

Young Gui Kim

Korea Institute for International Economic Policy

Jeongmeen Suh

Korea Institute for International Economic Policy

Date Written: December 30, 2010

Abstract

The purpose of this paper is to develop a theoretical framework to take several key determinants of exports into consideration and to propose an empirical model to identify which factors affect firms’ export performance, whether to start exporting (export extensity) and how much they will export (export intensity). Extending the Melitz (2003) model, in our theoretical part, we consider firm heterogeneity in two dimensions; fixed cost as well as productivity. As a result, when a firm with low productivity engages in exporting, there can also be a higher productive firm facing relatively high fixed cost. This allows us to resolve the difficulty in interpreting controversial empirical results, for example, whether productivity or firm size is a key determinant of export. Furthermore, in our empirical part, by using Korean firm-level data, we conclude that productivity plays an important role when a firm decides whether to start exporting, while fixed export costs variables are important determinants of fractions of outputs to be exported.

Keywords: Productivity, Export, Firm heterogeneity, fixed export costs, total factor productivity, overseas business costs, firm size

JEL Classification: D24, F12, L25

Suggested Citation

Kim, Young Gui and Suh, Jeongmeen, Determinants of Exports: Productivity or Fixed Export Costs (December 30, 2010). KIEP Research Paper No. Working Papers-10-06, Available at SSRN: https://ssrn.com/abstract=2489788 or http://dx.doi.org/10.2139/ssrn.2489788

Young Gui Kim (Contact Author)

Korea Institute for International Economic Policy ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

Jeongmeen Suh

Korea Institute for International Economic Policy ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

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