Export entry and exit by German firms

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Export Entry and Exit by German Firms. - While exports have played an important role in German business cycles, little is known about the export supply response of German firms. This paper presents a dynamic model of the export decision by a profit-maximizing firm. Using a panel of German manufacturing plants, we test for the role of plant characteristics and sunk costs in the entry decision. We find evidence for substantial sunk costs: exporting today by a plant increases the probability by 50 percent that the plant will export tomorrow. This advantage depreciates quickly, falling by two-thirds in a year. The authors also find evidence that plant success, as mea-sured by size and productivity, increases the likelihood of exporting.

Original languageEnglish
JournalWeltwirtschaftliches Archiv
Volume137
Issue number1
Pages (from-to)105-123
Number of pages19
ISSN0043-2636
DOIs
Publication statusPublished - 2001

DOI