Pol Antras, Harvard University
Presenter: Pol Antras
Abstract: Using Spanish firm level data for the period 2002-2013, we explore the differences in the export behavior of firms during the years of sustained economic growth, 2002-2008, and during the Great Recession years, 2009-2013. Exploiting plausibly exogenous geographical variation in the reduction in domestic demand caused by the financial crisis, we document empirically the existence of a robust, within-firm negative causal relationship between demand-driven changes in domestic sales and export flows: firms whose domestic sales were reduced by more during the crisis observed a larger increase in their export flows, even after controlling for firms’ supply determinants (such as labor costs). This negative relationship between domestic sales and export flows reflects the capacity of export markets to counteract the negative impact of local demand shocks. We rationalize and interpret our findings by developing a heterogeneous-firm model of exporting featuring non-constant marginal costs of production that create firm-level interdependencies in the extensive and intensive margins of sales across domestic and foreign markets. International Economics Seminar series is presented jointly with the Walsh School of Foreign Service and the Economics Department of Georgetown University.