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Decision to export among Ghanaian manufacturing firms: Does export destination influence the entry sunk cost?

Author

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  • Mulangu, Francis M.
  • Olarinde, Luke O.

Abstract

Two nonexclusive hypotheses have been put forward to explain why exporters enjoy higher productivity than do non-exporters: self-selection and learning-by-exporting. In the case of a small economy such as Ghana’s, we suspect that self-selection to export is less prevalent because of the high sunk cost of export market entry. While this sunk cost is considered high in the case of developing countries, its magnitude and persistence will vary by the export destination. The present paper evaluates how export destination influences export entry sunk cost. We use a dynamic probit model that corrects for the correlation between the error term and the lagged dependent variable and find African destinations to be associated with both lower and less persistent sunk costs of exporting relative to other export destinations.

Suggested Citation

  • Mulangu, Francis M. & Olarinde, Luke O., 2016. "Decision to export among Ghanaian manufacturing firms: Does export destination influence the entry sunk cost?," AGRODEP working papers 25, International Food Policy Research Institute (IFPRI).
    • Handle: RePEc:fpr:agrowp:25
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    Citations

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    Cited by:

    1. Emiko Fukase & Will Martin, 2016. "Agro-processing and horticultural exports from Africa," WIDER Working Paper Series wp-2016-174, World Institute for Development Economic Research (UNU-WIDER).
    2. Emiko Fukase & Will Martin, 2016. "Agro-processing and horticultural exports from Africa," WIDER Working Paper Series 174, World Institute for Development Economic Research (UNU-WIDER).
    3. Baliamoune-Lutz, Mina, 2019. "Trade sophistication in developing countries: Does export destination matter?," Journal of Policy Modeling, Elsevier, vol. 41(1), pages 39-51.

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