Export promotion and intra-industry reallocations

Publicly funded/subsidized export promotion agencies reducing informational barriers to export and thus firm-level fixed/sunk costs of exporting are present in most countries. This paper develops a two-country one-sector heterogeneous firms model with origin-specific publicly funded export promotion agencies and shows how the public good nature of export-relevant information and the ability to engage in global public affairs may rationalize the existence of such agencies. A novel finding of the model is that gains from export promotion are shared with the trade partner via intra-industry reallocations.