Exporting firms sacrifice profits for market potential, widening income inequality.
Firms that export goods have lower profits compared to firms that sell only within their country. This is because exporters aim for higher revenue by reaching a larger market. Small and domestic firms tend to have higher mark-ups, which are the differences between production costs and selling prices. In sectors with many firms and low capital-labor ratios, mark-ups vary more. Service sectors generally have more diverse mark-ups than manufacturing sectors. Overall, different types of firms cater to specific market segments with varying demand.