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Entry and Exit in International Markets: Evidence from Chilean Data

  • Roberto Alvarez
  • Ricardo A. López

Several studies examine the patterns and determinants of entry and exit in manufacturing industries. Not much work exists on entry and exit in international markets. This paper uses Chilean data to analyze the industry-level determinants of entry and exit in export markets. First, we show as stylized facts that entry and exit rates differ across industries, vary over time, and are positively correlated. Then, we study the main determinants of these patterns. Our econometric analysis shows that within-industry heterogeneity, measured by differences in productivity or other firm characteristics, has a significant effect on plant turnover in international markets. Our findings reveal that trade costs, factor intensities, and fluctuations in the real exchange rate play a minor role explaining entry and exit. This last result is consistent with hysteresis in international markets. Copyright � 2008 The Authors; Journal compilation � Blackwell Publishing Ltd 2008.

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Article provided by Wiley Blackwell in its journal Review of International Economics.

Volume (Year): 16 (2008)
Issue (Month): 4 (09)
Pages: 692-708

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Handle: RePEc:bla:reviec:v:16:y:2008:i:4:p:692-708
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  1. Stephen Redding & Anthony Venables, 2004. "Geography and Export Performance: External Market Access and Internal Supply Capacity," NBER Chapters, in: Challenges to Globalization: Analyzing the Economics, pages 95-130 National Bureau of Economic Research, Inc.
  2. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jenson & Samuel Kortum, 2000. "Plants and Productivity in International Trade," NBER Working Papers 7688, National Bureau of Economic Research, Inc.
  3. Richard Baldwin & Paul R. Krugman, 1986. "Persistent Trade Effects of Large Exchage Rate Shocks," NBER Working Papers 2017, National Bureau of Economic Research, Inc.
  4. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Wiley Blackwell, vol. 70(2), pages 317-341, 04.
  5. Sofronis Clerides & Saul Lach & James Tybout, 1996. "Is "learning-by-exporting" important? Micro-dynamic evidence from Colombia, Mexico and Morocco," Finance and Economics Discussion Series 96-30, Board of Governors of the Federal Reserve System (U.S.).
  6. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-97, November.
  7. José Miguel Benavente & Christian Ferrada, 2004. "Probability of Survival of New Manufacturing Plants: the case of Chile," Econometric Society 2004 Latin American Meetings 305, Econometric Society.
  8. Brian Aitken & Gordon H. Hanson & Ann E. Harrison, 1994. "Spillovers, Foreign Investment, and Export Behavior," NBER Working Papers 4967, National Bureau of Economic Research, Inc.
  9. Mark J. Melitz, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," NBER Working Papers 8881, National Bureau of Economic Research, Inc.
  10. Andrew B. Bernard & J. Bradford Jensen, 2001. "Who Dies? International Trade, Market Structure, and Industrial Restructuring," NBER Working Papers 8327, National Bureau of Economic Research, Inc.
  11. Roberto Alvarez & Ricardo López, 2005. "Exporting and performance: evidence from Chilean plants," Canadian Journal of Economics, Canadian Economics Association, vol. 38(4), pages 1384-1400, November.
  12. Sanghamitra Das & Mark J. Roberts & James R. Tybout, 2001. "Market entry costs, producer heterogeneity and export dynamics," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 03-10, Indian Statistical Institute, New Delhi, India.
  13. Dixit, A., 1988. "Entry And Exit Decisions Under Uncertainty," Papers 91, Princeton, Department of Economics - Financial Research Center.
  14. Timothy Dunne & Mark J. Roberts & Larry Samuelson, 1988. "Patterns of Firm Entry and Exit in U.S. Manufacturing Industries," RAND Journal of Economics, The RAND Corporation, vol. 19(4), pages 495-515, Winter.
  15. repec:rus:hseeco:122439 is not listed on IDEAS
  16. BARRIOS, Salvador & GÖRG, Holger & STROBL, Eric, . "Explaining firms' export behaviour: R&D, spillovers and the destination market," CORE Discussion Papers RP -1654, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  17. James E. Rauch, 1996. "Networks versus Markets in International Trade," NBER Working Papers 5617, National Bureau of Economic Research, Inc.
  18. Bernard, Andrew B. & Bradford Jensen, J., 1999. "Exceptional exporter performance: cause, effect, or both?," Journal of International Economics, Elsevier, vol. 47(1), pages 1-25, February.
  19. Geroski, P. A., 1995. "What do we know about entry?," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 421-440, December.
  20. Frances Ruane & Julie Sutherland, 2005. "Foreign Direct Investment and Export Spillovers: How Do Export Platforms Fare?," The Institute for International Integration Studies Discussion Paper Series iiisdp058, IIIS.
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