An Empirical Examination of Export Variety: Regional Heterogeneity within a Nation

Abstract

Recognising that similar goods are produced in different subregions within a country, we offer new evidence of variety expansion in a nation’s exports. We divide Japanese national exports into 41 prefectural subregions with over 7,000 product categories and construct subregional export margins for the years between 1988 and 2005. First, we find strong evidence of regional heterogeneity in terms of export product coverage, and the export variety of most regions expands in our sample period. Second, we find that the extensive margin accounts for over 60 per cent of the increase in exports of larger subregions, similar to the findings in the international cross-country study. These findings imply that accounting for export variety in terms of new exports from subregions within a country strengthens the contribution of extensive margin in the growth of exports.