The proximity-concentration tradeoff under uncertainty

Natalia Ramondo, Veronica Rappoport, Kim J. Ruhl

Research output: Contribution to journalArticle

16 Citations (Scopus)

Abstract

In this article, we analyse the firm's choice between serving a foreign market through exports or through foreign affiliate sales in an environment characterized by country-specific shocks to the cost of production. Our model predicts that country pairs with less-correlated output fluctuations trade more, relative to affiliate sales, whereas countries with more-volatile fluctuations are served relatively more by exporters than by foreign affiliates selling abroad. Using detailed data on trade and affiliate sales, we find empirical support for our model's predictions.

Original languageEnglish (US)
Article numberrdt018
Pages (from-to)1582-1621
Number of pages40
JournalReview of Economic Studies
Volume80
Issue number4
DOIs
StatePublished - Oct 1 2013

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Proximity
Trade-offs
Foreign affiliates
Uncertainty
Prediction model
Cost of production
Fluctuations
Output fluctuations
Exporters

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

Cite this

Ramondo, N., Rappoport, V., & Ruhl, K. J. (2013). The proximity-concentration tradeoff under uncertainty. Review of Economic Studies, 80(4), 1582-1621. [rdt018]. https://doi.org/10.1093/restud/rdt018
Ramondo, Natalia ; Rappoport, Veronica ; Ruhl, Kim J. / The proximity-concentration tradeoff under uncertainty. In: Review of Economic Studies. 2013 ; Vol. 80, No. 4. pp. 1582-1621.
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Ramondo, N, Rappoport, V & Ruhl, KJ 2013, 'The proximity-concentration tradeoff under uncertainty', Review of Economic Studies, vol. 80, no. 4, rdt018, pp. 1582-1621. https://doi.org/10.1093/restud/rdt018

The proximity-concentration tradeoff under uncertainty. / Ramondo, Natalia; Rappoport, Veronica; Ruhl, Kim J.

In: Review of Economic Studies, Vol. 80, No. 4, rdt018, 01.10.2013, p. 1582-1621.

Research output: Contribution to journalArticle

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