Residual exports and domestic demand: an empirical analysis

Abstract

This paper analyzes and quantifies the impact of exporter status on domestic sales. It is widely assumed that exporters sell in domestic markets more volume than non-exporters. In addition, non-persistent exporting firms have on average higher volumes of domestic sales in those years in which they are involved in export activities. This paper contributes to this literature by using data from a representative sample of Spanish manufacturing firms (Encuesta Sobre Estrategias Empresariales) over the period 1990-2011. By applying a difference-in-difference approach, results confirm that exporters have on average larger domestic sales (volumes and growth rates) than non-exporters. Additionally, a fixed and random effects model is also applied to measure the impact of exporter status on domestic sales, considering only exporting firms. Results suggest that exporter status increases domestic sales volumes, although it significantly reduces growth. We will refer to this deceleration as residual exports. The amount of the effect varies depending on firms’ persistence in export markets