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Firms' export decisions: Self-selection versus trial-and-error

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  • Movahedi, Mohammad
  • Shahbazi, Kiumars

Abstract

In this paper, a conceptual theoretical model is developed to better integrate various dimensions of the firms' decision to export. The model sheds light on the affirmations of the founding models of the 'new theory of international trade', in particular the role of productivity and sunk costs of exporting in the firms' export decision. It also takes into account two stylized facts that seem difficult to be reconciled with the implications of the founding models: 1) many domestic firms, regardless of their productivity level, enter foreign markets every year with little sales and cease all exporting activities in less than a year; 2) several of high-productivity firms choose to only serve their domestic market.

Suggested Citation

  • Movahedi, Mohammad & Shahbazi, Kiumars, 2020. "Firms' export decisions: Self-selection versus trial-and-error," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 14, pages 1-15.
  • Handle: RePEc:zbw:ifweej:202022
    DOI: 10.5018/economics-ejournal.ja.2020-22
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    References listed on IDEAS

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    1. Lawless, Martina, 2009. "Firm export dynamics and the geography of trade," Journal of International Economics, Elsevier, vol. 77(2), pages 245-254, April.
    2. Hallak, Juan Carlos & Sivadasan, Jagadeesh, 2013. "Product and process productivity: Implications for quality choice and conditional exporter premia," Journal of International Economics, Elsevier, vol. 91(1), pages 53-67.
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    5. Movahedi, Mohammad & Shahbazi, Kiumars & Gaussens, Olivier, 2017. "Innovation and willingness to export: Is there an effect of conscious self-selection?," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 11, pages 1-22.
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    More about this item

    Keywords

    firm heterogeneity; self-selection; sunk cost of exporting;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General

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