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Export supply, capacity, and relative prices

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  • Faini, Ricardo

Abstract

In the neoclassical approach to specifying an export supply equation, relative prices and capacity are assumed to play a crucial role in domestic firms'decisions to supply exports. In the Keynesian approach, the willingness of domestic firms to supply foreign markets is considered to be largely a function of domestic demand pressure. Keynesian analyses do not allow for the impact of relative prices. This paper blends the two approaches in a model,in which a firm is assumed to choose, first, the level of productive capacity and, then, one period later, to determine production and allocation between foreign and domestic markets on the basis of realized prices, demand conditions, and installed capacity. The conclusion: both prices and capacity are significant determinants of export supply.

Suggested Citation

  • Faini, Ricardo, 1988. "Export supply, capacity, and relative prices," Policy Research Working Paper Series 123, The World Bank.
    • Handle: RePEc:wbk:wbrwps:123
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    References listed on IDEAS

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    More about this item

    Keywords

    Geographical Information Systems; Economic Theory&Research; Environmental Economics&Policies; Access to Markets; Markets and Market Access;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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