Exporters' reaction to positive foreign demand shocks

TL;DR

This paper examines how Spanish swine exporters responded to China's 2018 ASF outbreak, a foreign demand shock, finding increased exports to China and positive effects on third-market performance, especially for small firms.

Contribution

It provides novel empirical evidence on exporters' reactions to a foreign demand shock using a quasi-natural experiment and detailed transaction data.

Findings

Swine exports to China tripled after ASF outbreak.

Export growth positively affected third-market revenue and survival.

Small exporters experienced the most intense positive impact.

Abstract

I use the quasi-natural experiment of the 2018 African swine fever (ASF) outbreak in China to analyze swine exporters' reaction to a foreign market's positive demand shock. I use the universe of Spanish firms' export transactions to China and other countries, and compare the performance of swine and other exporters before and after the ASF. The ASF almost tripled Spanish swine exporters' sales to China. Swine exporters did not increase exported product portfolio or export revenue concentration in their best-performing products in China after the ASF. The increase in exports to China positively impacted export revenue and survival in third markets. This positive impact was especially intense for small swine exporters. Domestic sales also increased for swine exporters with liquidity constraints before the ASF.