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A Note on the Link between Firm Size and Exports

By Pedro J. Hernandez

Abstract

This paper re-examines the link between firm size and exports in order to study the proposal that consists of increasing the firm size to raise exports as a way out of the current economic crisis. The elasticity of export propensity (percentage of exported sales) with respect to firm size depends on several firm characteristics. The new theories of international trade emphasize the firm heterogeneity as the theoretical basis of this behaviour. In the context of such heterogeneity, this paper uses the quantile regression methodology to analyze the effect of firm size on export propensity of the firms, confirming the existence of a positive relationship that becomes less important as export propensity increases. The traditional estimate of this elasticity on the average of the export propensities distribution underestimates the effect in the bottom of the distribution and overestimates the effect on most of it.

Topics: F14 - Empirical Studies of Trade, L25 - Firm Performance: Size, Diversification, and Scope
Year: 2013
OAI identifier: oai:mpra.ub.uni-muenchen.de:56745

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