Foreign market conditions and export performance: does ‘crowdedness’ reduce exports?

Foreign market conditions and export performance: does ‘crowdedness’ reduce exports?

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Article ID: iaor201111982
Volume: 44
Issue: 3
Start Page Number: 991
End Page Number: 1019
Publication Date: Aug 2011
Journal: Canadian Journal of Economics/Revue canadienne d'conomique
Authors: ,
Keywords: competition, exports, Italy, world trade
Abstract:

This paper analyzes the link between firm exports and the competitive environment in foreign markets. We derive a theory‐based econometric specification linking market‐specific exports to foreign demand and the degree of a market’s ‘crowdedness,’ which depends on the number and efficiency of firms competing there and the barriers impeding their access. Estimates on a large sample of Italian firms indicate that increased crowdedness has reduced Italian exports, but only by 0.2%–0.3% per year. This is substantially less than the contribution of other factors such as higher unit labour costs or weak demand growth in the EU15.

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