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Sensitivity of the Exporting Economy on the External Shocks: Evidence from Slovene Firms

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  • Janez Prašnikar

    ()

  • Velimir Bole

    ()

  • Aleš Ahcan

    ()

  • Matjaž Koman

    ()

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    Abstract

    In this paper we investigate the export participation of Slovene firms. We first show that sunk costs are an important factor for explaining the export behavior of Slovene firms. Next we show that when the absorption power of the exporting market declines, firms still trade with their established buyers (hysteresis) despite the fact that due to lower prices their exporting revenues decline. We show that this can be explained with high exit costs, which consist of switching costs (costs of replacing stable buyers with new ones) and cost of reducing the production (compensation money for excess workers) and high re-entry costs.

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    File URL: http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp634.pdf
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    Bibliographic Info

    Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 2003-634.

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    Length: 44 pages
    Date of creation: 01 Nov 2003
    Date of revision:
    Handle: RePEc:wdi:papers:2003-634

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    Related research

    Keywords: International trade; export; distressed export; entry costs; exit costs; credit raiting;

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