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The U-Shaped Productivity Dynamics of French Exporters

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  • Flora Bellone
  • Patrick Musso
  • Lionel Nesta
  • Michel Quere

Abstract

Sunk costs due to entry into foreign markets are used as the main justification of the relationship between firm productivity and exports. We use a large-scale dataset on French manufacturing firms to evaluate how sunk costs affect the productivity of new exporters. We find that the typical productivity dynamics of a new exporter is U-shaped. Prior to entry into export markets, firm productivity temporarily decreases. It recovers contemporaneously with entry, as the benefits from sales to foreign markets are harvested. This pattern is more pronounced for intensively exporting firms and for firms operating in capital intensive or high technology sectors.
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Suggested Citation

  • Flora Bellone & Patrick Musso & Lionel Nesta & Michel Quere, 2008. "The U-Shaped Productivity Dynamics of French Exporters," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 144(4), pages 636-659, December.
  • Handle: RePEc:spr:weltar:v:144:y:2008:i:4:p:636-659
    DOI: 10.1007/s10290-008-0164-x
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