Twin Peaks

52 Pages Posted: 10 Jan 2018

See all articles by Fabrice Defever

Fabrice Defever

City University London

Alejandro Riano

University of Nottingham - Faculty of Law and Social Sciences

Date Written: November 16, 2017

Abstract

Received wisdom suggests that most exporters sell the majority of their output domestically. In this paper, however, we show that the distribution of export intensity not only varies substantially across countries, but in a large number of cases is also bimodal, displaying what we refer to as twin peaks. We reconcile this new stylized fact with an otherwise standard, two-country model of trade in which firms are heterogeneous in terms of the demand they face in each market. We show that when firm-destination-specific revenue shifters are distributed lognormal, gamma, or Fréchet with sufficiently high dispersion, the distribution of export intensity has two modes in the boundaries of the support and their height is determined by a country’s size relative to the rest of the world. We estimate the deep parameters characterizing the distribution of export intensity. Our results show that when the conditions for the existence of twin peaks are met, differences in relative market size can explain most of the observed variation in the distribution of export intensity across the world.

Keywords: exports, export intensity distribution, bimodality, firm heterogeneity

JEL Classification: F120, F140, C120, O500

Suggested Citation

Defever, Fabrice and Riano, Alejandro, Twin Peaks (November 16, 2017). CESifo Working Paper Series No. 6729, Available at SSRN: https://ssrn.com/abstract=3099336 or http://dx.doi.org/10.2139/ssrn.3099336

Fabrice Defever

City University London ( email )

Northampton Square
London, EC1V OHB
United Kingdom

Alejandro Riano (Contact Author)

University of Nottingham - Faculty of Law and Social Sciences ( email )

Nottingham, NG8 1BB
United Kingdom

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