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Using a unique dataset that covers all exporting firms in New Zealand from 1996 to 2007, this paper analyses the patterns of their product mix, how it changes over time and how this relates to firm characteristics. We suggest that looking at the relative importance of added and dropped products is as important as firm entry/exit in reallocation of resources.
We find that in the cross section, multi-product firms are more productive than single product ones. Changes to product mix by New Zealand exporters occur frequently, suggesting that New Zealand exporters are dynamic and there is “creative destruction” at the product level.
It is also shown that dropping products is more likely to happen than adding products, suggesting the difficulty of entering new markets and products. We also show that products with a smaller share of total exports and products that have been exported for a short period of time are more likely to be dropped by a firm.
The results make a good case for product-firm characteristics being an important part of export decisions and suggest that more work should be done on this link.
I would like to thank James Beard, Bob Buckle, John Carran, Julian di Giovanni, Paul Rodway and participants at 2008 Econometric Society Australasian Meetings for comments and Julia Gretton and Michele Morris for help with the data. All errors are the author's.
The opinions, findings, recommendations and conclusions expressed in this report are those of the author. Statistics NZ and the New Zealand Treasury take no responsibility for any omissions or errors in the information contained here.
Access to the data used in this study was provided by Statistics NZ in accordance with security and confidentiality provisions of the Statistics Act 1975. Only people authorised by the Statistics Act 1975 are allowed to see data about a particular, business or organisation. The results in this paper have been confidentialised to protect individual businesses from identification.
The results are based in part on tax data supplied by Inland Revenue to Statistics NZ under the Tax Administration Act 1994. This tax data must be used only for statistical purposes, and no individual information is published or disclosed in any other form, or provided back to Inland Revenue for administrative or regulatory purposes. Any person who had access to the unit-record data has certified that they have been shown, have read and have understood section 81 of the Tax Administration Act 1994, which relates to privacy and confidentiality. Any discussion of data limitations or weaknesses is not related to the data's ability to support Inland Revenue's core operational requirements.
Statistics NZ protocols were applied to the data sourced from the New Zealand Customs Service. Any discussion of data limitations is not related to the data's ability to support the New Zealand Customs Service's core operational requirements.