Selection, Survival and Sorting Across International Markets: Evidence from Chinese Exporters

This paper studies the nature of firm-level turnover across markets worldwide and the evolution of key firm-level entry determinants, such as productivity and demand, in international markets. We document a number novel findings that distinguish the behaviour of Chinese exporters in international markets. First, firm-level sorting and export frequencies across markets are much more strongly correlated with demand than productivity among Chinese exporters. Second, firm-level turnover in international markets is extremely high even though the determinants of firm-level exporting productivity, demand and prices tend to be very persistent. Third, entering and exiting firms are substantially different than incumbent exporters. In particular, new exporters tend to be less productive, to have lower demand, and to charge higher prices on average. Fourth, market-specific demand strongly encourages survival in export markets while firm-level productivity does not. Last, we find that growth in firm-level demand is primary firm-level determinant of year-toyear export growth (rather than productivity). Further, the net entry of firms into export markets explains 60 percent of export demand growth.