Received wisdom suggests that most exporters sell most of their output domestically. We show, however, that the distribution of export intensity varies substantially across countries and is often bimodal, displaying ?twin peaks??that is, large shares of both low- and high-intensity exporters coexisting alongside each other within a country. We reconcile this new stylized fact with an otherwise standard model of trade in which firms face firm-destination-specific revenue shifters that follow a lognormal distribution with sufficiently high dispersion. We structurally estimate the model and show that differences in countries? size relative to the rest of the world can account for most of the observed cross-country variation in the distribution of export intensity in our data. While policies that incentivize firms to export a high share of their output account for a substantial share of the variation in the dispersion of firm-destination revenue shifters, they cannot fully account for the widespread prevalence of twin peaks around the world.

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1 June 2022

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Journal of the European Economic Association 20(3) , pp.1347-1394, 2022

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DOI: 10.1093/jeea/jvac006

https://academic.oup.com/jeea/advance-article-abstract/doi/10.1093/jeea/jvac006/6521445?redirectedFrom=fulltext

This Journal article is published under the centre's Trade programme.