Journal
JOURNAL OF INTERNATIONAL ECONOMICS
Volume 96, Issue 2, Pages 298-310Publisher
ELSEVIER
DOI: 10.1016/j.jinteco.2015.04.001
Keywords
Export; Domestic sales; Demand shocks; Markets
Categories
Funding
- Agence Nationale de la Recherche (ANR) [ANR 11 JSH1 002 01]
- Banque de France
- Fondation Banque de France
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How do firms' sales interact across markets? Are foreign and domestic sales complements or substitutes? Using a French firm-level database combining balance-sheet and product-destination-specific export information over the period 1995-2001, we study how demand conditions in foreign markets affect domestic sales through variations in exports. We identify a number of exogenous shocks affecting the firms' demand on foreign markets, including product-destination specific imports or tariff changes, and large foreign shocks such as financial crises or civil wars. Our results show that exogenous variations in firm-level exports positively impact domestic sales, even after controlling for domestic demand conditions. A 10% exogenous increase in foreign sales generates a 1 to 3% increase in domestic sales in the short-run. This result is robust to various estimation techniques, instruments, controls, and sub-samples. It is also supported by the natural experiment of the Asian crisis in the late 1990's. (C) 2015 Elsevier B.V. All rights reserved.
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