Sensitivity of the Exporting Economy on the External Shocks: Evidence from Slovene Firms

Janez Prašnikar (), Velimir Bole (), Aleš Ahcan () and Matjaž Koman ()

William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: In this paper we investigate the export participation of Slovene firms. We first show that sunk costs are an important factor for explaining the export behavior of Slovene firms. Next we show that when the absorption power of the exporting market declines, firms still trade with their established buyers (hysteresis) despite the fact that due to lower prices their exporting revenues decline. We show that this can be explained with high exit costs, which consist of switching costs (costs of replacing stable buyers with new ones) and cost of reducing the production (compensation money for excess workers) and high re-entry costs.

Keywords: International trade; export; distressed export; entry costs; exit costs; credit raiting (search for similar items in EconPapers)
JEL-codes: C20 F10 L10 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2003-11-01
New Economics Papers: this item is included in nep-ent
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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