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Exports, Investment and Firm-Level Sales Volatility

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  • Alejandro Riaño

Abstract

This paper presents a dynamic model of risk-averse producers’ decision to invest in physical capital and to export. The model features irreversible investment, no capital markets and fixed and sunk costs to export. Several features of the distribution of investment rates and export participation patterns observed in firm-level data are closely matched in a calibration exercise. Counterfactual experiments show that large adjustments in total sales associated with entry into foreign markets increase the volatility of total sales for exporting firms.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2011/wp-cesifo-2011-01/cesifo1_wp3319.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3319.

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Date of creation: 2011
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Handle: RePEc:ces:ceswps:_3319

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Keywords: exports; investment; uncertainty;

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  26. Roberts, Mark J & Tybout, James R, 1997. "The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs," American Economic Review, American Economic Association, vol. 87(4), pages 545-64, September.
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