Exporter Dynamics, Firm Size and Growth, and Partial Year Effects surviving exporters expand rapidly.

Timoshenko (2013) focuses on a different dimension of exporter behavior, the margin of product switching. A model of learning by exporters in new markets is motivated by the fact that Brazilian exporters in their second year in the market have disproportionately greater shares of sales from new products and greater shares of new products in their product mix. Partial year effects potentially play a role in these stylized facts as well, understating the number of products sold abroad in the first year of exporting and in turn overstating the growth in number of exported products and their share in sales between years one and two.<sup>3</sup>

# **Extensive margins in trade**

A related body of work has been attempting to understand the underlying sources of aggregate export growth and the importance of the extensive margins of trade. These extensive margins include new exporters and new destinations and products by existing exporters. Typically annual export growth is decomposed into the contribution of these extensive margins and the intensive margin, i.e. the change of sales of existing products by continuing exporters to previous destinations. Bernard, Jensen, Redding, and Schott (2009) find that the annual variation in aggregate trade is dominated by the intensive margin. The small role for the extensive margin is due primarily to the small size of new entrants relative to incumbents. Related analyses have been conducted by Lawless (2009) (Ireland); Amiti and Freund (2010) (China); Van Beveren, Bernard, and Vandenbussche (2012) (Belgium); and Cebeci and Fernandes (2013) (Turkey). The conclusion in all these papers that new exporters, new export destinations and newly exported products contribute only a small fraction to overall annual export growth is subject to potential downward bias from partial year

# **Firm size distribution**

Beyond the literature on export dynamics, the issues raised in this paper relate to the extensive body of work on the firm size distribution as exemplified by Axtell (2001) and Luttmer (2007) for the domestic economy and by Eaton, Kortum, and Kramarz (2011) for exporters by destination market.<sup>4</sup> All of these papers, and many others, find that the distributions of sales, or employees, closely approximate a Pareto distribution except in the region with the smallest firms. In every case, the smallest firms are present in greater numbers than suggested by a pure Pareto distribution.

> 3Freund and Pierola (2010) focus on exporter entry and survival in products not previously exported by Peruvian firms. As most of their analysis is on entry and the duration of export spells it is not directly affected by the partial year effects discussed here. However, it remains unknown how adjusting the date of the firm’s export year to reflect the initial month of entry would affect the probability of the frequently observed pattern of entry, exit and subsequent re-entry into the export market.

> 4Related work on firm size and growth includes Evans (1987b,a), Dunne, Roberts, and Samuelson (1989, 1988), Cabral and Mata (2003), and the survey by Sutton (1997).

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