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

44 Pages Posted: 25 Jan 2004

See all articles by Janez Praanikar

Janez Praanikar

University of Ljubljana - Faculty of Economics

Velimir Anton Bole

Economic Institute of the Law School

Ales Ahcan

University of Ljubljana

Matjaz Koman

University of Ljubljana

Date Written: November 2003

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.

Keywords: International trade, export, distressed export, entry costs, exit costs, credit raiting

JEL Classification: F10, L10, C20

Suggested Citation

Prasnikar, Janez and Bole, Velimir Anton and Ahcan, Ales and Koman, Matjaz, Sensitivity of the Exporting Economy on the External Shocks: Evidence from Slovene Firms (November 2003). Available at SSRN: https://ssrn.com/abstract=488807 or http://dx.doi.org/10.2139/ssrn.488807

Janez Prasnikar

University of Ljubljana - Faculty of Economics ( email )

Kardeljeva ploscad 17
Ljubljana, 1000
Slovenia

Velimir Anton Bole

Economic Institute of the Law School ( email )

Presernova 21, P.O. Box 1722
SI-1001 Ljubljana
Slovenia
+386 1 251 8704 (Phone)
+386 1 425 6870 (Fax)

Ales Ahcan

University of Ljubljana ( email )

Dunajska 104
1000 Ljubljana, 1000
Slovenia

Matjaz Koman (Contact Author)

University of Ljubljana ( email )

Dunajska 104
Ljubljana, 1000
Slovenia

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