Market‐specific Sunk Export Costs: The Impact of Learning and Spillovers

Maurseth, Per Botolf; Medin, Hege

doi:10.1111/twec.12420

Cited by 15 publications

(7 citation statements)

References 46 publications

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“…In referring here to costs being partially sunk on a market‐by‐market basis, we have quite a different model in mind than the well‐known sunk costs model of Roberts and Tybout () which describes sunk costs relating to entering and exiting exporting altogether. A number of recent papers have looked at this issue of entry or fixed costs being market specific such as Gullstrand (), Meinen () and Maurseth and Medin (). Each of these papers have found evidence of market‐specific sunk costs and that these may be affected by the firm's level of wider export experience and access to information channels about the market.…”

Section: Dynamics Of Exporting At the Firm Levelmentioning

confidence: 99%

Where Do Firms Export, How Much and Why?

Lawless

Whelan

2014

World Economy

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The empirical finding that exporting firms are more productive on average than non-exporters has provoked a large theoretical literature based on models such as Melitz (2003), where more productive firms are more likely to overcome costs associated with trade. This paper provides a systematic empirical assessment of the Melitz framework using a unique Irish dataset that includes information on destinations and firm characteristics such as productivity. We find a number of interesting deviations from the model's predictions including a high degree of unpredictable idiosyncratic participation in export markets by firms, a relatively weak positive correlation between the extent of export participation and export sales, and a limited role for productivity in explaining firm exporting behavior. We illustrate the effect of firm heterogeneity on gravity regressions of aggregate trade flows and show how past exporting to a particular market has a strong impact on the current probability of exporting there. *

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Section: Dynamics Of Exporting At the Firm Levelmentioning

confidence: 99%

Where Do Firms Export, How Much and Why?

Lawless

Whelan

2014

World Economy

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“…The literature has looked primarily into marketing costs (e.g., Arkolakis ; Irarrazabal, Moxnes, and Opromolla 2010; Eaton, Kortum, and Kramarz ), but has paid less attention to FECs. Available studies infer the existence of FECs from choices about export behavior (Roberts and Tybout ; Das, Roberts, and Tybout ; Hanson and Xiang ; Maurseth and Medin ). Helpman, Melitz, and Rubinstein () analyze bilateral aggregate trade statistics, taking FECs as a confounding factor to control for.…”

Section: Introductionmentioning

confidence: 99%

Fixed Export Costs and Export Behavior

Castro¹,

Li²,

Maskus

et al. 2016

Southern Economic Journal

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This paper provides a direct test of how fixed export costs and productivity jointly determine firm-level export behavior. Using Chilean data, we construct indices of fixed export costs for each industry-region-year triplet and match them to domestic firms. Our empirical results show that firms facing higher fixed export costs are less likely to export, while those with higher productivity export more. These outcomes are the foundation of the widely-used sorting mechanism in trade models with firm heterogeneity. A particularly novel finding is that high-productivity nonexporters face greater fixed export costs than low-productivity exporters. We also find that the substitution between fixed export costs and productivity in determining export decisions is weaker for firms with higher productivity. Finally, both larger fixed export costs and greater within-triplet productivity dispersion raise the export volume of the average exporter.JEL codes: F10, F12, F14.

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“…The argument in favor of self-selection relates to the additional costs of exporting. Entering export markets involves sunk costs linked to obtaining knowledge of foreign markets, the screening of potential customers, the set-up of foreign distribution channels and the adoption of products and services to the local needs and tastes (Kneller and Pisu 2007;Maurseth and Medin 2016). These costs act as an entry barrier, preventing less productive firms from exporting.…”

Section: International Trade and Productivitymentioning

confidence: 99%

Does trade participation limit domestic firms’ productivity gains from inward foreign direct investment?

2020

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We examine to what extent domestic firms reap differential productivity gains from the presence of manufacturing affiliates of multinational firms in the home country (FDI spillovers), in the context of simultaneous participation in international trade through exporting and importing. FDI spillovers can occur within the industry (horizontal) and across industries due to client (forward) or supplier (backward) linkages of multinational firms, but the mechanisms underlying spillover effects may be attenuated if local firms are less reliant on inputs, clients, and competition in the domestic market. Fixed effects panel analyses on a sample of 4594 domestic Belgian firms during 2000–2007 reveal positive effects from horizontal, backward, and forward FDI spillovers on the productivity levels of domestic firms, as long as these firms do not engage in international trade. Horizontal spillovers from FDI are weaker for firms engaging in trade, while forward FDI spillovers do not benefit importing firms. Two-way traders benefit least from FDI spillovers. Forward and backward spillovers, are enhanced by human capital levels in local firms, while horizontal spillovers are reduced. The findings are broadly consistent with the notion that trade engagement and inward FDI can be substitutes in their effects on domestic firms’ productivity.

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Market‐specific Sunk Export Costs: The Impact of Learning and Spillovers

Cited by 15 publications

References 46 publications

Where Do Firms Export, How Much and Why?

Where Do Firms Export, How Much and Why?

Fixed Export Costs and Export Behavior

Does trade participation limit domestic firms’ productivity gains from inward foreign direct investment?

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