Article ID Journal Published Year Pages File Type
5066623 European Economic Review 2015 16 Pages PDF
Abstract
This paper explores the role of sunk costs versus learning in explaining persistence in exporting. Multiple studies attributed such persistence to sunk market-entry costs. This paper shows that similar patterns of exporting are also consistent with a learning mechanism and finds a strong empirical support for such a mechanism in the context of Colombian plant-level data. Second, the paper empirically discriminates between the two competing theories, and finds that once learning is controlled for, the role of sunk costs in generating export persistence is at most forty percent of what is currently estimated in the literature. Finally, while in differentiated-products industries export persistence arises primarily due to learning, in the homogeneous-products industries such persistence arises primarily due to the sunk-cost mechanism.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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