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Distance to the Core, Productivity and Selection of Export Products-Destinations

Cardoso-Vargas, Carlos Enrique (2017): Distance to the Core, Productivity and Selection of Export Products-Destinations.

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Abstract

This document examines and quantifies the effect that productivity and firm-internal selection have on the sale of new products to new destinations To quantify the influence of the firm-internal selection, we used a measurement of distance to the core which reflects, by means of an index, the degree that commercial distance merchandise sold has vis-à-vis the core product. The results show that decreasing the distance for products far from the core would require a great deal of effort on the part of firms in terms of quality or cost. It was also determined that if the distance between a product to be exported and the core product is doubled, its probability of generating a new product-country commercial link decreases 7.72 percentage points. That possibility decreases even further to destinations with consumers with high purchasing power. In the internal selection made by companies with regard to their products, there are factors influencing the selection of merchandise other than the core product. They move in opposite directions. On the one hand, there is a positive effect emanating from productivity and firm size, as well as an opposite effect due to market access and core-product price. The findings have implication for the possibilities of diversifying markets and expanding export-product portfolios.

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