Exporter Dynamics, Firm Size and Growth, and Partial Year Effects using transaction-level export data on Peruvian exports from 1992-2009. The partial year bias is found to be very large, causing the level of first-year exports of all new exporters to be understated by 65 percent on average and overstating the average growth rate between the first and second year of exporting by 112 percentage points. Similar partial year effects are found in the year of exit from the market.

Empirical work using annual firm-level export data by Eaton, Eslava, Kugler, and Tybout (2008) and others has documented a set of strong empirical regularities about the performance of exporters over time. These regularities include the fact that new market entrants, either new exporters or continuing exporters in new markets, have small levels of exports upon entry, a large fraction of entrants export for only a single year before exiting the market, and surviving entrants have extremely rapid export growth between years one and two with more modest growth rates subsequently. These facts have been taken as evidence against models of high sunk costs of entry into export markets as in Roberts and Tybout (1997) and have generated a growing literature on learning and experimentation in export markets.

Correcting for the partial year bias in the calendar year exports of new market entrants eliminates or dramatically mitigates most of these stylized facts. Surviving new entrants still have smaller initial levels than ongoing exporters but on average their adjusted first year sales are increased by more than 76 percent. Surviving entrants have adjusted exports in their first year that are 160 percent greater than those recorded in the annual data. Extremely rapid growth rates in the first year of exporting, average rates well over 100 percent are typical, are completely eliminated for surviving entrants. Growth rates in the first year are no different on average from those in subsequent years after adjusting for the month of entry.<sup>2</sup> In addition, we examine the implications of the partial year bias for an older set of facts on firm size and growth that have been the focus of substantial research in industrial organization. A large fraction of firms are new to the market in each year; from 1994 to 2007, 45.8 percent of Peruvian exporters were new to the US market each year. New entrants are a sizable fraction of firms even in developed economies. Over the same period, an average of 10.5 percent of active US firms (513,000) began operations each year. Correcting for partial year biases increases the average size of new entrants into exporting, reduces the number of small firms in the market, and shifts the overall structure of the firm size distribution of exporters. More than 10 percent of new Peruvian exporters move from below to above the median firm size after adjusting for the partial year bias with commensurate adjustments to their first year growth rates. The adjustments also weaken the negative relationships between firm growth and its variance and firm size as the level and dispersion of growth rates for the smallest quintile of market participants are reduced.

The empirical approach of this paper is heavily influenced by Arkolakis (2011) who develops

> 2Firm exit rates remain very high for new entrants in export markets.

2