Replication Data for the paper "Export Market Size Matters"

Previous literature finds that export intensity is an important determinant of regional manufacturing development. However, it has not yet been established whether market size of export destinations is also an important factor to explain diverging regional and sectorial manufacturing growth patterns. This article argues that accessing large external markets reduces transaction costs, fosters capital formation and helps to circumvent lack of demand issues and saturate economies of scale. To test this hypothesis, we construct a new Relative Export Market Size (REMS) index that measures the relative purchasing power of export destinations. Using a PVAR model, we verify the impact of the REMS index on value added, employment and capital accumulation of 129 manufacturing sectors in 23 regions in Colombia during the period 1992-2017. The obtained results indicate that exporting to larger markets has a positive impact on employment, capital formation and value added per capita of manufacturing sectors and regions.