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Export Entry and Exit by German Firms

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  • Andrew B. Bernard
  • Joachim Wagner

Abstract

This paper examines the decision to enter the export market by German firms. While exports have played an important role in recent German business cycle movements, little is known about the export supply response of German firms. This paper presents a dynamic model of the export decision by a profit-maximizing firm. Using a panel of German manufacturing plants, we test for the role of plant characteristics and sunk costs in the entry decision. We find evidence for substantial sunk costs in export entry; exporting today by a plant increases the probability that the plant will export tomorrow by 50%. This advantage depreciates quickly, falling by two thirds in a year. We also find evidence that plant success, as measured by size and productivity, increases the likelihood of exporting.

Suggested Citation

  • Andrew B. Bernard & Joachim Wagner, 1998. "Export Entry and Exit by German Firms," NBER Working Papers 6538, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:6538
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    References listed on IDEAS

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    1. Dixit, Avinash K, 1989. "Entry and Exit Decisions under Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 620-638, June.
    2. Andrew B. Bernard & J. Bradford Jensen, 2004. "Why Some Firms Export," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 561-569, May.
    3. Sofronis K. Clerides & Saul Lach & James R. Tybout, 1998. "Is Learning by Exporting Important? Micro-Dynamic Evidence from Colombia, Mexico, and Morocco," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(3), pages 903-947.
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    5. Avinash Dixit, 1989. "Hysteresis, Import Penetration, and Exchange Rate Pass-Through," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(2), pages 205-228.
    6. Andrew Bernard & Joachim Wagner, 1997. "Exports and success in German manufacturing," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 133(1), pages 134-157, March.
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    11. Keane, Michael P & Runkle, David E, 1992. "On the Estimation of Panel-Data Models with Serial Correlation When Instruments Are Not Strictly Exogenous," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(1), pages 1-9, January.
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    More about this item

    JEL classification:

    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory

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