Scandinavian Working Papers in Economics

Ratio Working Papers,
The Ratio Institute

No 220: Distance Sensitivity of Export: A Firm-Product Level Approach

Viroj Jienwatcharamongkhol ()
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Viroj Jienwatcharamongkhol: The Ratio Institute & Department of Economics, Postal: The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden, , Department of Economics, Lund University, P.O. Box 7082, SE-220 07 Lund, Sweden.

Abstract: Recent literature suggests that the extent to which exports of a product is influenced by distance depends on the product characteristics. Differentiated products with non-standardised attributes are typically claimed to be more distance-sensitive as transactions should involve interactions between buyers and sellers. But the empirical evidence still finds conflicting results. Previous studies have examined the effect of distance on export values across different product groups. This paper employs a gravity model on Swedish firm-product level export data to analyse the effect of distance on the export decisions as well as export values, respectively. The focus is on how the influence of distance varies across differentiated and non-differentiated products. For both export participation and intensity decisions, the results are not in line with the network/search view and suggest that homogeneous products are more sensitive to distance than differentiated products when controlling for annual shocks and industry heterogeneity. Moreover, I find evidence of a learning effect from past trade experience.

Keywords: distance sensitivity; export decisions; gravity model; firmproduct level; micro-data

JEL-codes: F12; F14; F41

29 pages, October 1, 2013

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