Two Worlds Apart? Export Demand Shocks and Domestic Sales

Arbeitspapier

Traditional heterogeneous firms and trade models predict no causal relationship between firms' exports and domestic sales. This paper, using a rich dataset on Turkish firms for the 2005-14 period, analyzes the relationship between firm-product sales in different markets for the first time in the literature to identify the channels that link exports and domestic sales. First, I use an instrumental variables strategy and establish that an exogenous doubling of exports increases a firm's domestic sales by 26 percent on average--a result that is mostly driven by small firms. Second, I do an analogous exercise at the firm-product level, and find coefficients that are 62 percent larger, hinting to the importance of product-specific scale effects. Moreover, I propose a novel approach to isolate the production versus non-production factors that influence firm dynamics by focusing on non-produced (or carry-along trade, CAT) exports. I find that CAT exports also affect domestic sales positively, suggesting that spillovers at the firm level such as the easing of liquidity constraints play a role. In the process, I reveal that export demand shocks influence firms' expansion in terms of employment, wages per employee, and investment.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Tinbergen Institute Discussion Paper ; No. TI 2018-062/VI

Classification and Topics

• Classification: Wirtschaft ; Empirical Studies of Trade ; Economic Impacts of Globalization: Microeconomic Impacts ; Firm Objectives, Organization, and Behavior: General
• Subject: international trade ; domestic sales ; export shocks ; carry-along trade

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Erbahar, Aksel A.
• Event: Veröffentlichung
• (who): Tinbergen Institute
• (where): Amsterdam and Rotterdam
• (when): 2018

Further information

• Handle: http://hdl.handle.net/10419/185581
• Last update: 10.03.2025, 11:43 AM CET