Firm Export Dynamics in Interdependent Markets (with Alonso Alfaro-Ureña, Juan Manuel Castro-Vincenzi, and Eduardo Morales)
Revised and resubmitted, American Economic Review.
We estimate a model of firm export dynamics featuring cross-country complementarities. The firm decides where to export by solving a dynamic combinatorial discrete choice problem, for which we develop a solution algorithm that overcomes the computational challenges inherent to the large dimensionality of its state space and choice set. According to our estimated model, firms enjoy cost reductions when exporting to countries geographically or linguistically close to each other, or that share deep trade agreements. Countries, especially small ones, sharing these traits with attractive destinations receive significantly more exports than in the absence of complementarities.