DP15236 Superstar Exporters: An Empirical Investigation of Strategic Interactions in Danish Export Markets

Author(s):	Federico Ciliberto, Ina Charlotte Jäkel
Publication Date:	August 2020
Keyword(s):	export participation, multiple equilibria, Strategic interaction, trade policy
JEL(s):	F12, F14, L13
Programme Areas:	Industrial Organization
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=15236

In many countries, exports are highly concentrated among a few "superstar" firms. We estimate the export decisions of superstar firms as the result of a complete information, simultaneous, discrete choice, static entry game. We employ a dataset on the universe of Danish trade transactions by firm, product and destination. We also obtain detailed information on applied, preferential tariff protection from the MAcMap-HS6 database. We find evidence of strong negative competitive effects of entry: in the absence of strategic competitive effects, firms would be 53.2 percentage points more likely to export to a given market. Next, we run two counterfactual exercises. We show that failing to account for the strategic interaction among superstar exporters leads to: (i) overstating the probability that firms would start exporting to a market following tariff elimination by a factor of two; and, (ii) overstating the probability that firms would stop exporting to a market if tariffs were imposed by a factor of more than five.