overview of the smallest exporters, while the customs data is likely to be much more exhaustive. As a result, the export propensity calculated for the smallest size class of firms is likely to provide a misleading pattern. Note that from Section 4.3 onwards, when we study the export destinations and product concentration, we lower the threshold to 1000 USD per year.

The number of globally engaged firms in Rwanda has trended up noticeably over the 2008 to 2016 sample period, as depicted in Figure 4. This growth is broadly based, showing up in the three major sectors that we consider—agriculture, mining, and manufacturing—and using various thresholds to identify globally engaged firms. Overall, only 43 firms exported more than 10,000 USD in 2008 and this increased to 101 in 2016, which represents an increase by 135% over 9 years.

In spite of this increase, the total number of exporters is still remarkably low, even in 2016. This is especially true considering that the total of 101 includes all firms selling a mere 10 000 USD per year. This total amounts to a single exporter per 120,000 inhabitants or one exporter per 91 million USD of GDP.

The number of exporters grew strongly after the latest global recession (in 2009), more than doubling from 2010 to 2014. In more recent years, the growth has stalled and in the last two years of the sample period the total number of globally engaged firms even declined. It is more likely to be the result of civil unrest in Burundi and armed violence in the DRC in 2015 and 2016, than because of incomplete reporting in the most recent years. We base this conclusion on several pieces of evidence. First, aggregate statistics for our sample line up rather well with the aggregate data from the World Bank. Second, in conversations with manufacturers in Rwanda, they often highlighted the troubled political situation in the two neighboring countries. Third, results in tables below show that the decline in the last two years is most pronounced for manufacturers, which are more likely to export to neighboring countries than agriculture or mining firms.

If we used a threshold that is 10 times higher, i.e. exporting 100 000 USD per year, only 71 firms in Rwanda would qualify as globally engaged by 2016. While this is lower than earlier number, it is not that much lower given the 10-fold increase in the threshold. It highlights that very few firms export more than 10,000 USD, but less than 100,000 USD. In more developed countries, we expect a power law, meaning that the number of firms that export 10 times as much would be 10 times smaller (or some other proportionate decrease). This is clearly not the case in Rwanda. Among the 101 firms that exceed the 10,000 USD threshold for exports, more than one third even exceed the 100-fold higher threshold of exporting at least 1 million USD per year, depicted by the black line in Figure 4.

A potential explanation for the rather limited number of firms that export small quantities is that fixed cost of exporting are important. This mechanism features prominently in the seminal paper of Melitz (2003) to explain export market participation. Only firms that are sufficiently productive and that can reasonably expect to export a sufficiently large amount, find it worthwhile to incur the necessary fixed outlays to enter the export market. These fixed costs can be related to transportation infrastructure, searching for potential clients, adjusting the product to foreign market, familiarizing oneself with customs procedures, etc.

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