Exploring the Margins of Dutch Exports: A Firm-Level Analysis

This paper utilizes new Dutch transaction-level data on international trade to investigate the microeconomic patterns of Dutch exports. First, we show that self-selection based on ex-ante productivity drives firms’ export decisions, which we subsequently relate to various sources of fixed market-entry costs: governance and regulatory quality, the extent of corruption, and cultural proximity. Second, we provide evidence that firms learn to export by trial and error, so as to obtain experience in exporting and to gather knowledge about the potential of foreign markets. Such experimentation appears to be reflected in the volatility of a firm’s export product portfolio. More volatility is associated with a higher survival rate in the export market. Finally, we draw conclusions on the potential implications for trade policy.