We argue that this problem may bias results in several published studies. We propose a set of adjustments that reduce this bias. We conjecture that similar principles apply to state-level exports. States can diversify across industries and across foreign countries. We also show that average export performance is positively related to industrial concentration and to destination country concentration.
Exports are also a vehicle through which foreign disturbances impact the local economy.
These effects vary widely across regions due to differences in regions' mixes of industries and foreign trading partners. The data is usually cross-sectional, with one observation per person. The coefficient estimate on years of schooling is interpreted as the rate of return to schooling. Yet, the optimizing choice of education is based on the lifetime return , not just the return to education in a randomly chosen year. Simple observation shows that this assumption is not plausible.