Scale, scope, and trade dynamics of export processing plants

- We establish stylized facts about export processing (EP) firms using trade data for China.
- Compared to non-processing exporters, EP firms are larger but less diversified.
- EP firms start exporting larger volumes but grow less over time within a market.
- EP firms are more likely to start selling to more distant markets.
- Incorporating uncertainty in the heterogeneous-firm model may explain these facts.

We use transaction-level data for the universe of Chinese trading firms over 2000-2006 to document that compared to ordinary exporters, export processing firms are larger but less diversified in products and destinations within the same industry; start exporting larger volumes but grow less over time within a market; are more likely to start selling to more distant markets but less likely to penetrate new ones after the first year. Since EP firms face less uncertainty, these facts can be rationalized in light of the heterogeneous-firm model with uncertainty in export sales, such as Fernandes and Tang (2014).