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The proximity-concentration tradeoff under uncertainty

Ramondo, Natalia and Rappoport, Veronica and Ruhl, Kim J. (2013) The proximity-concentration tradeoff under uncertainty. Review of Economic Studies, 80 (4). pp. 1582-1621. ISSN 0034-6527

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Identification Number: 10.1093/restud/rdt018

Abstract

In this article, we analyse the firm's choice between serving a foreign market through exports or through foreign affiliate sales in an environment characterized by country-specific shocks to the cost of production. Our model predicts that country pairs with less-correlated output fluctuations trade more, relative to affiliate sales, whereas countries with more-volatile fluctuations are served relatively more by exporters than by foreign affiliates selling abroad. Using detailed data on trade and affiliate sales, we find empirical support for our model's predictions.

Item Type: Article
Official URL: http://restud.oxfordjournals.org/
Additional Information: © 2013 The Author
Subjects: H Social Sciences > HF Commerce
Sets: Departments > Management
Research centres and groups > Centre for Economic Performance (CEP)
Research centres and groups > Managerial Economics and Strategy Group
Date Deposited: 12 Nov 2013 10:05
Last Modified: 06 Oct 2015 23:00
Projects: SES-0536970
Funders: National Science Foundation
URI: http://eprints.lse.ac.uk/id/eprint/54268

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