Discussion paper

DP18403 Firm Export Dynamics in Interdependent Markets

We estimate a model of firm export dynamics featuring cross-country complementarities. The firm decides where to export by solving a dynamic combinatorial discrete choice problem, for which we develop a solution algorithm that overcomes the computational challenges inherent to the large dimensionality of its state space and choice set. According to our estimated model, firms enjoy cost reductions when exporting to countries geographically or linguistically close to each other, or that share deep trade agreements; and countries, especially small ones, sharing these traits with attractive destinations receive significantly more exports than in the absence of complementarities.


Alfaro-Urena, A, J Castro-Vincenzi, S Fanelli and E Morales (2023), ‘DP18403 Firm Export Dynamics in Interdependent Markets‘, CEPR Discussion Paper No. 18403. CEPR Press, Paris & London. https://cepr.org/publications/dp18403