MULTI-PRODUCT EXPORTERS AND PRODUCT SWITCHING BEHAVIOUR OF NEW ZEALAND FIRMS

Using a unique dataset that covers (at 10 digit product codes) all exporting firms in New Zealand from 1997 to 2007, this paper analyzes 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 product switching occurs frequently. It is also shown that dropping products is more likely to happen than adding products, suggesting the difficulty of entering new markets/products. We also show that products with a smaller share and tenure are more likely to be dropped by a firm. Finally, the link between volatility of earnings and the choice of product mix suggests that single product exporters are more stable. 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.