We document that new exporters initially export small amounts, grow gradually, and are most likely to exit the export market in their first few years. We find that the standard sunk-cost model cannot replicate these new exporter dynamics: New exporters grow too large too quickly and live too long. In a modified sunk-cost model that can account for these facts, the entry costs needed to match the data are three times smaller than in the sunk-cost model. Dynamic models with richer plant-level heterogeneity are needed.
All Science Journal Classification (ASJC) codes
- Economics and Econometrics