Darwinian Effect & Firms’ Export Decision

Abstract There was no funding for this project We develop a theoretical framework for a novel industry level effect “Darwinian Effect”: lower industry level opportunity cost has a negative effect on export revenues for firms serving that industry, relative to rest of the economy. This effect arises from an industry level relative productivity improvement that leads to a lower opportunity cost. Lower opportunity cost decreases the relative price index of the industry thus increasing the relative competitiveness of the sector. As a result, the probability of firm level export participation falls in the industry. We test this prediction using plant level data from Chile and Colombia; finding support for our hypothesis.