Does domestic demand matter for firms’ exports?

Paulo Soares Esteves; Miguel Portela; António Rua

doi:10.1007/s11079-021-09623-9

Does domestic demand matter for firms’ exports?

Paulo Soares Esteves, Miguel Portela, António Rua

NOVA School of Business and Economics (NOVA SBE)

Research output: Contribution to journal › Article › peer-review

Abstract

The existence of a link between exports and domestic demand challenges the standard theoretical assumption in international trade models and carries out important policy implications. In our empirical setup the estimated relationship between exports and domestic sales results directly from a monopolistic model of a firm selling to both domestic and external markets. We find a noteworthy negative relationship between domestic sales and firms’ exports covering the manufacturing sector over the period 2009 – 2016. This result holds for almost all industries although with a heterogeneous magnitude. Additionally, there is also evidence that this effect is stronger for larger firms.

Original language	English
Pages (from-to)	311-322
Journal	Open Economies Review
Volume	33
Issue number	2
DOIs	https://doi.org/10.1007/s11079-021-09623-9
Publication status	Published - Apr 2022

Keywords

Domestic demand
Exports
Firms
Foreign demand
International trade
Panel data

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10.1007/s11079-021-09623-9

Cite this

@article{ada41c87bf5f4e90852103c6924cadd3,

title = "Does domestic demand matter for firms{\textquoteright} exports?",

abstract = "The existence of a link between exports and domestic demand challenges the standard theoretical assumption in international trade models and carries out important policy implications. In our empirical setup the estimated relationship between exports and domestic sales results directly from a monopolistic model of a firm selling to both domestic and external markets. We find a noteworthy negative relationship between domestic sales and firms{\textquoteright} exports covering the manufacturing sector over the period 2009 – 2016. This result holds for almost all industries although with a heterogeneous magnitude. Additionally, there is also evidence that this effect is stronger for larger firms.",

keywords = "Domestic demand, Exports, Firms, Foreign demand, International trade, Panel data",

author = "Esteves, {Paulo Soares} and Miguel Portela and Ant{\'o}nio Rua",

note = "Funding Information: The opinions expressed in the article are those of the authors and do not necessarily coincide with those of Banco de Portugal or the Eurosystem. Any errors and omissions are the sole responsibility of the authors. The authors thank to Pedro Portugal for helpful comments on an earlier version of the paper. The authors would also like to thank two anonymous reviewers for comments and suggestions. Miguel Portela acknowledges that this paper is financed by National Funds of the FCT – Portuguese Foundation for Science and Technology, projects UID/ECO/03182/2019 and PTDC/EGE-ECO/29822/2017. The data used in this paper are proprietary. The data is made available under an individual protocol between Statistics Portugal and the researchers. All Stata codes used are available from the authors upon request. Publisher Copyright: {\textcopyright} 2021, The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature. Copyright: Copyright 2021 Elsevier B.V., All rights reserved.",

year = "2022",

month = apr,

doi = "10.1007/s11079-021-09623-9",

language = "English",

volume = "33",

pages = "311--322",

journal = "Open Economies Review",

issn = "0923-7992",