"Essays on Firm Learning and Trade Dynamics"

Hamilton, Benjamin, Economics - Graduate School of Arts and Sciences, University of Virginia
Harrigan, James, AS-Economics, University of Virginia
Cosar, Kerem, AS-Economics, University of Virginia
Mclaren, John, AS-Economics, University of Virginia

In the first chapter of this dissertation, I present a model of exporting with demand uncertainty where incumbent firms in a market reveal signals about a common component of demand that potential entrants observe and use to update their beliefs. Using transaction-level Chilean export data, I estimate these signals within disaggregate product-destination markets and their effect on new exporters along three margins: entry into new markets, the quantity of output sold, and the duration of trade spells. A one-standard-deviation increase in the signal revealed by incumbents is associated with
a 3.8% increase in entry rates among potential entrants, along with a 9.8% increase in first-year sales and 0.8% increase in duration for new entrants. The effects of these signals are larger in countries which are further away from Chile, in countries where Spanish is not an official language, and for less differentiated products.
In the second chapter, I examine whether a similar mechanism is present for importing firms whereby they infer information about the quality of imported intermediates and capital goods from the sourcing behavior of their compatriots. Using data on Chilean importers and controlling for heterogeneous export capacities across sectors, source countries, and time, I show that the probability of a firm sourcing a product from a particular origin country, the quantity imported, and relationship survival time increase with the number of compatriots sourcing the same product from the same origin country and the value imported in the previous year. Specifically, entry is 6.6% more likely, import values are 8.0% higher, and relationship survival times are 4.4% longer for product-market pairs in which there is at least one incumbent Chilean firm sourcing the same product from the same origin in the previous year.
In the final chapter, I use results from the first two chapters to estimate the effect of exporting on importing, and vice versa, within a firm-country pair. That is, when a firm begins to export its output to a foreign country, is it more likely to begin importing from that country? Additionally, for a firm which begins to import from a particular country, is the same firm more likely to begin exporting to that country? Because the decision to engage in these two activities is endogenous, I use the presence of firms exporting (importing) the same products to (from) the same country to instrument for initial export (import) entry to estimate the effect of exporting (importing) on importing (exporting). Positive and significant OLS estimates imply that a firm beginning to export to a country is 5.2% more likely in the year after that firm begins importing from that country, with smaller and insignificant effects in the other direction. However, insignificant 2SLS results using six different measures of incumbent presence as instruments indicate that entry into either of these activities within a firm-country pair does not make the other more likely in the following years.

PHD (Doctor of Philosophy)
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