True Versus Spurious State Dependence in Firm Performance: The Case of German Exports

Ulrich Kaiser () and Hans Christian Kongsted
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Hans Christian Kongsted: Department of Economics, University of Copenhagen

No 2007-02, CIE Discussion Papers from University of Copenhagen. Department of Economics. Centre for Industrial Economics

Abstract: This paper analyzes the persistence of firms' exporting behavior in a panel of German manufacturing firms using dynamic binary choice models. We distinguish between true and spurious state dependence in exports and apply fixed effects methods that allow us to verify the robustness of our results to critical assumptions on firms' initial export status. We find robust evidence of state dependence in the current export status of firms. We also document an important role of unobserved permanent firm heterogeneity ("spurious state dependence") and quantify the relative importance of different export determinants. Our results, which are consistent with the findings of previous studies on firms in developing countries and in the United States, show the presence of important sunk costs in export market entry and a depreciation of knowledge and experience in export markets.

Keywords: state dependence; export activity; dynamic binary choice models; fixed effects (search for similar items in EconPapers)
JEL-codes: C23 D21 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2007-04
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Citations: View citations in EconPapers (1)

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