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 obse...

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Main Authors:	Bastos, Paulo, Dias, Daniel A., Timoshenko, Olga A.
Format:	Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2016
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

id	okr-10986-24504
recordtype	oai_dc
spelling	okr-10986-245042021-04-23T14:04:22Z Learning, Prices, and Firm Dynamics Bastos, Paulo Dias, Daniel A. Timoshenko, Olga A. 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 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. 2016-06-13T21:00:01Z 2016-06-13T21:00:01Z 2016-05 Working Paper http://documents.worldbank.org/curated/en/2016/05/26363172/learning-prices-firm-dynamics http://hdl.handle.net/10986/24504 English en_US Policy Research Working Paper;No. 7667 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	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
spellingShingle	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 Bastos, Paulo Dias, Daniel A. Timoshenko, Olga A. Learning, Prices, and Firm Dynamics
relation	Policy Research Working Paper;No. 7667
description	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.
format	Working Paper
author	Bastos, Paulo Dias, Daniel A. Timoshenko, Olga A.
author_facet	Bastos, Paulo Dias, Daniel A. Timoshenko, Olga A.
author_sort	Bastos, Paulo
title	Learning, Prices, and Firm Dynamics
title_short	Learning, Prices, and Firm Dynamics
title_full	Learning, Prices, and Firm Dynamics
title_fullStr	Learning, Prices, and Firm Dynamics
title_full_unstemmed	Learning, Prices, and Firm Dynamics
title_sort	learning, prices, and firm dynamics
publisher	World Bank, Washington, DC
publishDate	2016
url	http://documents.worldbank.org/curated/en/2016/05/26363172/learning-prices-firm-dynamics http://hdl.handle.net/10986/24504
_version_	1764456893079617536

Learning, Prices, and Firm Dynamics

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