What Explains the Low Survival Rate of Developing Country Export Flows? [electronic resource] / Brenton, Paul

By: Brenton, PaulContributor(s): Brenton, Paul | Saborowski, Christian | von Uexkull, ErikMaterial type: TextTextPublication details: Washington, D.C., The World Bank, 2009Description: 1 online resource (38 p.)Subject(s): Adverse impacts | Bilateral trade | Currencies and Exchange Rates | Debt Markets | Econometric analysis | Economic size | Economic Theory and Research | Emerging Markets | Export growth | Exports | Finance and Financial Sector Development | Fixed costs | Free Trade | Income | Income groups | Income levels | Inequality | International Economics and Trade | International trade | Law and Justice | Macroeconomics and Economic Growth | Markets and Market Access | Overvaluation | Poverty Reduction | Private Sector Development | Product differentiation | Production costs | Purchasing power | Tax Law | Technical assistance | Trade Law | Trade Policy | Trade policy | Transition economies | Unemployment | WealthAdditional physical formats: Brenton, Paul.: What Explains the Low Survival Rate of Developing Country Export Flows?Online resources: Click here to access online Abstract: Successful export growth and diversification require not only entry into new export products and markets, but also the survival and growth of export flows. This paper uses a detailed, cross-country dataset of product level bilateral export flows to illustrate that exporting is an extremely perilous activity and especially so in low-income countries. The authors find that unobserved individual heterogeneity in product-level export flow data prevails despite controlling for a wide range of observed country and product characteristics. This questions previous studies that have used the Cox proportional hazards model to model export survival. The authors estimate a Prentice-Gloeckler model, amended with a gamma mixture distribution summarizing unobserved individual heterogeneity. The empirical results confirm the significance of a range of products as well as country-specific factors in determining the survival of export flows. From a policy perspective, an interesting finding is the importance of learning-by-doing for export survival: experience with exporting the same product to other markets or different products to the same market are found to strongly increase the chance of export survival. A better understanding of such learning effects could substantially improve the effectiveness of export promotion strategies.
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Successful export growth and diversification require not only entry into new export products and markets, but also the survival and growth of export flows. This paper uses a detailed, cross-country dataset of product level bilateral export flows to illustrate that exporting is an extremely perilous activity and especially so in low-income countries. The authors find that unobserved individual heterogeneity in product-level export flow data prevails despite controlling for a wide range of observed country and product characteristics. This questions previous studies that have used the Cox proportional hazards model to model export survival. The authors estimate a Prentice-Gloeckler model, amended with a gamma mixture distribution summarizing unobserved individual heterogeneity. The empirical results confirm the significance of a range of products as well as country-specific factors in determining the survival of export flows. From a policy perspective, an interesting finding is the importance of learning-by-doing for export survival: experience with exporting the same product to other markets or different products to the same market are found to strongly increase the chance of export survival. A better understanding of such learning effects could substantially improve the effectiveness of export promotion strategies.

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