Learning versus sunk costs explanations of export persistence

Olga Timoshenko

European Economic Review, 2015, vol. 79, issue C, 113-128

Abstract: This paper explores the role of sunk costs versus learning in explaining persistence in exporting. Multiple studies attributed such persistence to sunk market-entry costs. This paper shows that similar patterns of exporting are also consistent with a learning mechanism and finds a strong empirical support for such a mechanism in the context of Colombian plant-level data. Second, the paper empirically discriminates between the two competing theories, and finds that once learning is controlled for, the role of sunk costs in generating export persistence is at most forty percent of what is currently estimated in the literature. Finally, while in differentiated-products industries export persistence arises primarily due to learning, in the homogeneous-products industries such persistence arises primarily due to the sunk-cost mechanism.

Keywords: Learning; Sunk costs; Export participation; State dependence (search for similar items in EconPapers)
JEL-codes: F1 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (60)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:79:y:2015:i:c:p:113-128

DOI: 10.1016/j.euroecorev.2015.02.006

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