Manuel Adelino, Paulo Fagandini, Miguel A. Ferreira, Francisco Queiró
Publication year: 2019

We show that shocks to domestic demand can have important effects on exports. Austerity measures implemented in southern European countries as a result of the 2010-2011 sovereign debt crisis were a large and unanticipated shock to government spending. We show that firms with higher ex-ante government exposure significantly increased their exports as a result. Older and larger firms are better able to substitute domestic sales with entry into export markets than younger and smaller firms. Higher-quality firms (i.e., firms with higher paid workers, higher productivity and more educated managers) are also more likely to start exporting. Unlike previous research on non-tradable industries, our results suggest that more mature firms drive the response of tradable industries to demand shocks.