Using macro-level trade data, we investigate how different types of sunk costs influence decisions of exporters. We find that exporters’ decisions reflect sensibly their desire to minimize the relationship-specific sunk costs. Specifically, exporters of differentiated products are more likely to reenter the export market than exporters of homogenous products. Also, the former are more likely to stay in the export market and exhibit more stability when doing so than the later. All of our findings are consistent with the view that relationship with their foreign partners matters more for trade in differentiated products than in homogenous ones.
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Paper provided by Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance in its series Economics Series with number
2007_06.
Find related papers by JEL classification: F14 - International Economics - - Trade - - - Country and Industry Studies of Trade O30 - Economic Development, Technological Change, and Growth - - Technological Change - - - General
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