Modelling manufactured exports in Europe: a two-regime approach

Of the hundreds of empirical studies examining the determinants of aggregate export volumes, almost all are based on a theoretical model that assumes that firms are operating in an identical environment. The very few studies that attempt to relax this assumption are all subject to their limitations. In this paper, a simple two-regime model is presented that allows for some environmental heterogeneity but avoids the shortcomings of the earlier approaches. This model performs generally satisfactorily when applied to nine Western European nations.