New Exporter Dynamics

27 Pages Posted: 28 Nov 2014

See all articles by Kim J. Ruhl

Kim J. Ruhl

New York University (NYU), Leonard N. Stern School of Business - Department of Economics

Jonathan L. Willis

Federal Reserve Bank of Kansas City

Date Written: November 1, 2014

Abstract

Models in which heterogeneous plants face sunk export entry costs are standard tools in the international trade literature. How well do these models account for the observed dynamics of new exporters? We document that new exporters initially export small amounts and — conditional on continuing in the export market — grow gradually over several years. New exporters are most likely to exit the export market in their first few years. We construct a dynamic discrete choice model of exporting and find that the standard model cannot replicate the behavior of new exporters: New exporters grow too large too quickly and live too long. We assess the quantitative importance of accounting for new exporter dynamics by extending the model to account for these facts. In this model, the present value of exporting falls relative to the baseline model. As a result, the entry costs needed to account for the data are three times smaller than in the baseline model.

Suggested Citation

Ruhl, Kim Joseph and Willis, Jonathan, New Exporter Dynamics (November 1, 2014). Federal Reserve Bank of Kansas City Working Paper No. 14-10, Available at SSRN: https://ssrn.com/abstract=2531105 or http://dx.doi.org/10.2139/ssrn.2531105

Kim Joseph Ruhl

New York University (NYU), Leonard N. Stern School of Business - Department of Economics ( email )

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Jonathan Willis (Contact Author)

Federal Reserve Bank of Kansas City ( email )

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816-881-2199 (Fax)

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