Presented by Davide Rigo, PhD candidate in International Economics
Co-authored with: Oliver Exton

Abstract:

We provide direct evidence that exporters grow by accumulating customer base in a foreign market. We then test how firms adjust customer base in response to a negative shock by exploiting the trade policy uncertainty associated with the renegotiation of the UK-EU trade relationship following the Brexit referendum. Using the French customs data, we show that French exporters in 2016-2017 were less likely to enter into exporting to the UK and incumbent exporters acquired a lower number of new buyers in the UK compared with the other European countries. We incorporate these findings in a model with sunk investment costs to accumulate customer base and trade policy uncertainty.