A Variable-Parameter Model of Exporting Behaviour .

This paper has two purposes. The first is to introduce an econometric model of export pricing and sales behaviour, the parameters of which vary with some indicator of excess productive capacity. For the individual firm this is achieved simply by proposing that it follows a demand-constrained regime when levels of working are low, and a supply constrained regime when full capacity is approached. Application of this sort of model to the whole economy would lead to implausible discontinuities; as overall capacity utilization rose a switching point would be reached where factors influencing demand—world trade, competitor prices—became suddenly unimportant and tho se influencing supply—investment, profitability—became suddenly all-important. The second purpose of this paper is to offer a resolution of this conceptual inelegance by postulating that at any one time firms experience a variety of capacity utilization conditions distributed around means which are generally high at peaks of the domestic business cycle and low in troughs. The resulting aggregate equations exhibit no unwonted discontinuities. [ABSTRACT FROM AUTHOR]