Where Do Firms Export, How Much, and Why? Martina Lawless∗ Central Bank and Financial Services Authority of Ireland

The empirical finding that exporting firms are more productive on average than non-exporters has provoked a large theoretical literature based on models such as Melitz (2003), where more productive firms are more likely to overcome costs associated with trade. This paper provides a systematic empirical assessment of the productivity heterogeneity framework using an Irish dataset that includes information on destinations and firm characteristics such as productivity. We find a high degree of unpredictable idiosyncratic participation in export markets by firms, a relatively weak positive correlation between the extent of a firm’s export market partici-pation and its export sales, and a limited role for productivity in explaining firm exporting behavior. We illustrate the effect of firm heterogeneity on gravity regressions of aggregate trade flows and show how past exporting to a particular market has a strong impact on the current probability of exporting there. ∗E-mail