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

Author

Listed:
  • Janez Pra??nikar

    ()

  • Velimir Bole

    ()

  • Ale?? Ahcan

    ()

  • Matja?? Koman

    ()

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.

Suggested Citation

  • Janez Pra??nikar & Velimir Bole & Ale?? Ahcan & Matja?? Koman, 2003. "Sensitivity of the Exporting Economy on the External Shocks: Evidence from Slovene Firms," William Davidson Institute Working Papers Series 2003-634, William Davidson Institute at the University of Michigan.
  • Handle: RePEc:wdi:papers:2003-634
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    File URL: http://deepblue.lib.umich.edu/bitstream/2027.42/40020/3/wp634.pdf
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    More about this item

    Keywords

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

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General

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