Survival in Export Markets

Facundo Albornoz, Juan Hallak and Sebastian Fanelli

No 112, Working Papers from Universidad de San Andres, Departamento de Economia

Abstract: This paper explores the determinants of firm survival in export markets. Our theoretical framework includes a geometric Brownian motion for firm profitability, market-specific sunk and fixed exporting costs that are common across firms, and firm- and market-specific profitability shifters that are constant over time. We derive the probability of survival upon entry in an export market. We show that this probability increases with the ratio of sunk to fixed costs and is insensitive to the profitability shifters. Also, we show that the survival probability is unaffected by fixed costs if sunk costs are zero. Combining our theoretical results with observed patterns of survival among Argentine exporters, we infer the impact of distance and experience on the magnitude of sunk and fixed costs. In our data set, survival rates upon entry decrease with distance and increase with experience. Hence, we infer that fixed costs increase more with distance than sunk cost while fixed costs fall with experience sufficiently strongly to dominate the fall in sunk costs. These results carry implications on parametrizations of theoretical models of export dynamics and serve as a benchmark to assess structural estimates of fixed and sunk costs.

Keywords: survival; export dynamics; fixed cost; sunk cost; productivity; firm heterogeneity; geometric Brownian motion (search for similar items in EconPapers)
JEL-codes: F10 F12 F14 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2014-08, Revised 2014-08
New Economics Papers: this item is included in nep-bec and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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https://webacademicos.udesa.edu.ar/pub/econ/doc112.pdf First version, 2014 (application/pdf)

Related works:
Journal Article: Survival in export markets (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:sad:wpaper:112

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