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Exports, investment and firm-level sales volatility

  • Alejandro Riaño

    ()

This paper presents a dynamic model of risk-averse producers’ decision to invest in physical capital and to export. The model features irreversible investment, no capital markets and fixed and sunk costs to export. Several features of the distribution of investment rates and export participation patterns observed in firm-level data are closely matched in a calibration exercise. Counterfactual experiments show that large adjustments in total sales associated with entry into foreign markets increase the volatility of total sales for exporting firms.

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File URL: http://hdl.handle.net/10.1007/s10290-011-0104-z
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Article provided by Springer in its journal Review of World Economics.

Volume (Year): 147 (2011)
Issue (Month): 4 (November)
Pages: 643-663

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Handle: RePEc:spr:weltar:v:147:y:2011:i:4:p:643-663
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  19. Lawless, Martina, 2006. "Geography and Firm Exports: New Evidence on the Nature of Sunk Costs," Research Technical Papers 1/RT/06, Central Bank of Ireland.
  20. Diego Comin & Thomas Philippon, 2005. "The Rise in Firm-Level Volatility: Causes and Consequences," NBER Working Papers 11388, National Bureau of Economic Research, Inc.
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  23. Tobias J. Moskowitz & Annette Vissing-Jorgensen, 2002. "The Returns to Entrepreneurial Investment: A Private Equity Premium Puzzle?," NBER Working Papers 8876, National Bureau of Economic Research, Inc.
  24. Tobias J. Moskowitz & Annette Vissing-Jørgensen, 2002. "The Returns to Entrepreneurial Investment: A Private Equity Premium Puzzle?," American Economic Review, American Economic Association, vol. 92(4), pages 745-778, September.
  25. Roberts, Mark J & Tybout, James R, 1997. "The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs," American Economic Review, American Economic Association, vol. 87(4), pages 545-64, September.
  26. Tauchen, George, 1986. "Finite state markov-chain approximations to univariate and vector autoregressions," Economics Letters, Elsevier, vol. 20(2), pages 177-181.
  27. Maloney, William F. & Azevedo, Rodrigo R., 1995. "Trade reform, uncertainty, and export promotion: Mexico 1982-88," Journal of Development Economics, Elsevier, vol. 48(1), pages 67-89, October.
  28. Hirsch, Seev & Lev, Baruch, 1971. "Sales Stabilization Through Export Diversification," The Review of Economics and Statistics, MIT Press, vol. 53(3), pages 270-77, August.
  29. R. Gaston Gelos & Alberto Isgut, 2001. "Fixed Capital Adjustment: Is Latin America Different?," The Review of Economics and Statistics, MIT Press, vol. 83(4), pages 717-726, November.
  30. Eldor, Rafael & Zilcha, Itzhak, 1987. "Discriminating Monopoly, Forward Markets and International Trade," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(2), pages 459-68, June.
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