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New exporter dynamics

Author

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  • Kim J. Ruhl
  • Jonathan L. Willis

Abstract

Models in which heterogeneous plants face sunk export entry costs are standard tools in the international trade literature. How well do these models account for the observed dynamics of new exporters? We document that new exporters initially export small amounts and ? conditional on continuing in the export market ? grow gradually over several years. New exporters are most likely to exit the export market in their first few years. We construct a dynamic discrete choice model of exporting and find that the standard model cannot replicate the behavior of new exporters: New exporters grow too large too quickly and live too long. We assess the quantitative importance of accounting for new exporter dynamics by extending the model to account for these facts. In this model, the present value of exporting falls relative to the baseline model. As a result, the entry costs needed to account for the data are three times smaller than in the baseline model

Suggested Citation

  • Kim J. Ruhl & Jonathan L. Willis, 2014. "New exporter dynamics," Research Working Paper RWP 14-10, Federal Reserve Bank of Kansas City.
  • Handle: RePEc:fip:fedkrw:rwp14-10
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    • Kim J. Ruhl & Jonathan L. Willis, 2017. "New Exporter Dynamics," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 58(3), pages 703-726, August.

    References listed on IDEAS

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