| Abstract: |
Exporting firms around the world ship only a small fraction of their output
overseas. For firms in a large country, such as the United States, this
behavior can be explained by the existence of a large domestic market. For
firms in a small lower income country, such as Colombia, the lower share of
exports remains a puzzle. This paper begins by illustrating the failure of
current models to explain plant export patterns in Colombia. Even models that
do well in describing the US export distribution fail when confronted with the
Colombian data. In response to this puzzle, this paper proposes a model in
which wealthier individuals produce and consume higher quality products.
Predictions of the model are tested on Colombian plant level data from
1981-1991. Overall, product quality is shown to be a significant factor in
explaining the tendency for Colombian plants to under-export manufactured
goods to the United States. |