Export Survival with Uncertainty and Experimentation

Sebastián Fanelli and Juan Hallak

No 4356, Asociación Argentina de Economía Política: Working Papers from Asociación Argentina de Economía Política

Abstract: Two central facts characterize the dynamics of firm exports. One is the known fact that export survival rates are strikingly low one year after entering a foreign market. The other is the novel fact that re-entrants in export markets are more likely to survive than first-time entrants. Existing models of exporter dynamics cannot explain these two facts. In this paper, we develop a tractable model of exporter dynamics that can explain them by introducing uncertainty and experimentation. The model delivers analytical predictions on survival probabilities upon entry in a foreign market. In addition to the two facts, the model can also explain other exporter dynamics facts that have been the focus of previous work. We test the main mechanism of the model by exploiting variation in the degree of uncertainty across products and markets. The results support the relevance of uncertainty and experimentation as a central feature that characterize exporter dynamics.

Keywords: Exporter dynamics; uncertainty; experimentation; foreign demand; geometric brownian motion. (search for similar items in EconPapers)
JEL-codes: F10 F12 F14 (search for similar items in EconPapers)
Pages: 64 pages
Date: 2020-11
New Economics Papers: this item is included in nep-int
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https://aaep.org.ar/works/works2020/Hallak.pdf (application/pdf)

Related works:
Working Paper: Export Survival with Uncertainty and Experimentation (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:aep:anales:4356

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