Abstract
Abstract This paper is the first to explore the links between exporting and importing activities of Egyptian firms using panel data over the period from 2003 to 2007. The main aim is twofold. Firstly, the authors report regression results indicating that firms that both export and import are the most productive, followed by importing-, exporting-only firms and non-traders. Secondly, they estimate the determinants of the extensive and intensive margins of exports and imports using dynamic panel-Probit and panel-Tobit models in combination with the method proposed by Rabe-Hesketh and Skrondal (Avoiding biased versions of Wooldridge’s simple solution to the initial conditions problem, 2013) to tackle the initial conditions problem. The results show that both activities present a high degree of hysteresis, which is higher for imports than for exports pointing to the existence of sunk costs in both activities. Moreover, past productivity does affect the extensive margin of imports, but not of exports and the initial condition status is also only relevant for the import side. Similar outcomes are obtained for the intensive margin of trade.
Highlights
In recent years, there has been a growing interest in the study of the internationalization strategies of small- and medium-size firms in developing countries
Once one of the activities is carried out, the second becomes easier. These cost complementarities have motivated a new strand of research that further investigates the relationship between import and export activities at the firm level, especially those focused on the use of imported intermediates and their role in enhancing exports (Muûls and Pisu 2009; Bas 2012; Aristei et al 2013; Kasahara and Lapham 2013; Lo Turco and Maggioni 2013)
We focus our analysis on Egypt because is one of the most important countries in the MENA (Middle East and North African) region in terms of population and gross domestic product (GDP), and it is a developing country
Summary
There has been a growing interest in the study of the internationalization strategies of small- and medium-size firms in developing countries. Once one of the activities is carried out, the second becomes easier These cost complementarities have motivated a new strand of research that further investigates the relationship between import and export activities at the firm level, especially those focused on the use of imported intermediates and their role in enhancing exports (Muûls and Pisu 2009; Bas 2012; Aristei et al 2013; Kasahara and Lapham 2013; Lo Turco and Maggioni 2013). While most of the existent literature on the relationship between productivity and import and export activities has focused on developed countries, the literature concerning developing countries is still scarce. We aim to extend the existing evidence by investigating export and import activities of firms located in Egypt, a developing country that to the best of our knowledge has not yet been investigated
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