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Export market exit and firm survival: theory and first evidence


  • Sanne Hiller

    () (Department of Economics, Leuphana University Lueneburg, Germany)

  • Philipp J.H. Schroeder

    () (Aarhus University, School of Business and Social Sciences, Department of Economics and Business, Denmark)

  • Allan Sorensen

    () (Aarhus University, School of Business and Social Sciences, Department of Economics and Business, Denmark)


This paper deploys a dynamic extension of the Melitz (2003) model to generate predictions on export market exit and firm survival in a setting where firms endogenously make exit decisions. The central driver of the model dynamics is the inclusion of exogenous economy wide technological progress. The model predicts – inter alia – that a higher relative productivity not only increases the likelihood of exporting, but also the chances of firm survival and continued export market engagements. We relate these predictions to the empirical stylized facts of export market exit and firm survival based on Danish firm-level data. We find strong evidence that firms experience a decline in market share prior to export market exit and prior to death and that the firms discontinuing their exporting activity or closing down tend to be small. Overall, our empirical results support the central predictions from the model.

Suggested Citation

  • Sanne Hiller & Philipp J.H. Schroeder & Allan Sorensen, 2013. "Export market exit and firm survival: theory and first evidence," Working Paper Series in Economics 262, University of Lüneburg, Institute of Economics.
  • Handle: RePEc:lue:wpaper:262

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    References listed on IDEAS

    1. Schröder, Philipp J.H. & Sørensen, Allan, 2012. "Firm exit, technological progress and trade," European Economic Review, Elsevier, vol. 56(3), pages 579-591.
    2. Joachim Wagner, 2013. "Exports, imports and firm survival: first evidence for manufacturing enterprises in Germany," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 149(1), pages 113-130, March.
    3. Impullitti, Giammario & Irarrazabal, Alfonso A. & Opromolla, Luca David, 2013. "A theory of entry into and exit from export markets," Journal of International Economics, Elsevier, vol. 90(1), pages 75-90.
    4. Costas Arkolakis, 2016. "A Unified Theory of Firm Selection and Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 131(1), pages 89-155.
    5. Thierry Mayer & Gianmarco Ottaviano, 2008. "The Happy Few: The Internationalisation of European Firms," Intereconomics: Review of European Economic Policy, Springer;German National Library of Economics;Centre for European Policy Studies (CEPS), vol. 43(3), pages 135-148, May.
    6. Balazs Murakozy & Gabor Bekes, 2009. "Temporary Trade," IEHAS Discussion Papers 0909, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
    7. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-670, May.
    8. Dasgupta, Partha & Stiglitz, Joseph, 1981. "Entry, innovation, exit : Towards a dynamic theory of oligopolistic industrial structure," European Economic Review, Elsevier, vol. 15(2), pages 137-158.
    9. Richard E. Caves, 1998. "Industrial Organization and New Findings on the Turnover and Mobility of Firms," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 1947-1982, December.
    10. Amil Petrin & Brian P. Poi & James Levinsohn, 2004. "Production function estimation in Stata using inputs to control for unobservables," Stata Journal, StataCorp LP, vol. 4(2), pages 113-123, June.
    11. Steven Klepper, 2002. "Firm Survival and the Evolution of Oligopoly," RAND Journal of Economics, The RAND Corporation, vol. 33(1), pages 37-61, Spring.
    12. Fariñas, Jose C. & Ruano, Sonia, 2005. "Firm productivity, heterogeneity, sunk costs and market selection," International Journal of Industrial Organization, Elsevier, vol. 23(7-8), pages 505-534, September.
    13. 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 545-564, September.
    14. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 317-341.
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    Cited by:

    1. Görg, Holger & Spaliara, Marina-Eliza, 2013. "Export market exit, financial pressure and the crisis," CEPR Discussion Papers 9599, C.E.P.R. Discussion Papers.
    2. repec:eee:jbfina:v:87:y:2018:i:c:p:150-163 is not listed on IDEAS

    More about this item


    Intra-industry trade; entry/exit; heterogeneous firms; technological change;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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