Learning, Prices, and Firm Dynamics

This paper documents new facts about the joint evolution of firm performance and prices in international markets and proposes a theory of firm dynamics emphasizing the interaction between learning about demand and quality choice to explain the observed patterns. Using data from the Portuguese manufacturing sector, the paper documents that: (1) within narrow product categories, firms with longer spells of activity in export destinations tend to ship larger quantities at similar prices, thus obtaining larger export revenue; (2) older exporters tend to import more expensive inputs; and (3) revenue growth within destinations (conditional on initial size) tends to decline with market experience. The authors develop a model of endogenous input and output quality choices in a learning environment that is able to quantitatively account for these patterns. Counterfactual simulations reveal that minimum quality standards on exports reduce welfare by lowering entry in export markets and reallocating resources from old and large toward young and small firms.

Bibliographic Details

Main Authors:	Bastos, Paulo, Dias, Daniel A., Timoshenko, Olga A.
Format:	Working Paper biblioteca
Language:	English en_US
Published:	World Bank, Washington, DC 2016-05
Subjects:	MERCHANDISE, UCT, E-MAIL, EXPORT MARKETS, SUBSTITUTION, INTANGIBLE ASSETS, PRODUCTION, SUNK COSTS, STOCK, SEARCH, SALES, EXPECTATIONS, PERFECT COMPETITION, MARGINAL COST, INTEREST RATE, INFORMATION, EXPORTS, DOMESTIC MARKET, ELASTICITY, POLITICAL ECONOMY, WELFARE, BOOK VALUE, EQUILIBRIUM, DISTRIBUTION, VARIABLES, PRICING, BANDWIDTHS, PRICE, INPUTS, PRODUCT QUALITY, TIME PERIOD, INPUT PRICES, OLIGOPOLY, CUSTOMS CLEARANCE, OPEN ACCESS, DEVELOPMENT, CHOICE, TIME PERIODS, MARKET ENTRY, FOREIGN TRADE, COSTS, DEVELOPMENT ECONOMICS, PRICE DYNAMICS, EXPORT GROWTH, CUSTOMS, PRODUCTS, MANUFACTURING INDUSTRY, PRODUCTIVITY, GLOBALIZATION, PRODUCT DESIGN, COMMERCIAL POLICY, MARKETS, WEB, LINKS, MATERIAL, CONSUMER PREFERENCES, TRADE POLICY, PRODUCT, ELASTICITY OF SUBSTITUTION, UTILITY, DISCOUNTED VALUE, EXPORT MARKET, EXPENDITURE, TRANSACTIONS, MANUFACTURING, TECHNOLOGY, R&D, CONSUMPTION, VALUE ADDED, SUBSTITUTE, INSPECTION, WAGES, INTERNATIONAL TRADE, VOLATILITY, RESULTS, MERCHANDISE EXPORTS, MARKET ENTRY COSTS, VALUE, RAW DATA, DEMAND, UTILITY FUNCTION, PRODUCT CATEGORIES, PRICE LEVEL, CONSUMERS, INFORMATION PROVIDERS, PRODUCT CATEGORY, INTERNATIONALISATION, MEASUREMENT, MARKET, INDUSTRY PRODUCTIVITY, TRADE LIBERALIZATION, TOTAL SALES, ECONOMICS, PRODUCTION FUNCTION, REGRESSION ANALYSIS, RESULT, ECONOMIC DEVELOPMENT, TRADE, FOREIGN COMPETITION, GDP, GOODS, THEORY, SECURITY, GROWTH RATE, BUSINESS, NETWORK, EXPECTED UTILITY, BANDWIDTH, FINANCIAL MARKETS, PERFORMANCE, SUPPLY, REVENUE, ECONOMIC ACTIVITIES, EQUILIBRIUM PRICES, INVESTMENTS, MISSING VALUES, MONOPOLISTIC COMPETITION, SUPPLIERS, DATABASE, EXTERNAL MARKETS, PRICE INDEX, INTERNATIONAL MARKETS, TARGET, PRICES, ECONOMIC STATISTICS, DEVELOPMENT POLICY,
Online Access:	http://documents.worldbank.org/curated/en/2016/05/26363172/learning-prices-firm-dynamics http://hdl.handle.net/10986/24504
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