Export Entry and Exit by German Firms

27 Pages Posted: 27 Aug 2000 Last revised: 15 May 2021

See all articles by Andrew B. Bernard

Andrew B. Bernard

Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Joachim Wagner

University of Lueneburg - Institute of Economics; Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Economics; IZA Institute of Labor Economics

Date Written: April 1998

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

Bernard, Andrew B. and Wagner, Joachim, Export Entry and Exit by German Firms (April 1998). NBER Working Paper No. w6538, Available at SSRN: https://ssrn.com/abstract=226273

Andrew B. Bernard (Contact Author)

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Joachim Wagner

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