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Export market exit and firm survival: theory and first evidence

Sanne Hiller (), Philipp J.H. Schroeder () and Allan Sørensen ()
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Sanne Hiller: Department of Economics, Leuphana University Lueneburg, Germany
Philipp J.H. Schroeder: Aarhus University, School of Business and Social Sciences, Department of Economics and Business, Denmark

Authors registered in the RePEc Author Service: Sanne Kruse-Becher () and Philipp J.H. Schröder

No 262, Working Paper Series in Economics from University of Lüneburg, Institute of Economics

Abstract: This paper deploys a dynamic extension of the Melitz (2003) model to generate predictions on export market exit and firm survival in a setting where firms endogenously make exit decisions. The central driver of the model dynamics is the inclusion of exogenous economy wide technological progress. The model predicts – inter alia – that a higher relative productivity not only increases the likelihood of exporting, but also the chances of firm survival and continued export market engagements. We relate these predictions to the empirical stylized facts of export market exit and firm survival based on Danish firm-level data. We find strong evidence that firms experience a decline in market share prior to export market exit and prior to death and that the firms discontinuing their exporting activity or closing down tend to be small. Overall, our empirical results support the central predictions from the model.

Keywords: Intra-industry trade; entry/exit; heterogeneous firms; technological change (search for similar items in EconPapers)
JEL-codes: F12 F15 O33 L11 L16 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-cse and nep-int
Date: 2013-01
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