True Versus Spurious State Dependence in Firm Performance: The Case of West German Exports

23 Pages Posted: 17 Dec 2004 Last revised: 15 Aug 2008

See all articles by Ulrich Kaiser

Ulrich Kaiser

University of Southern Denmark - Faculty of Social Sciences; Center for Economic and Business Research (CEBR); Centre for European Economic Research

Christian Kongsted

University of Copenhagen - Department of Economics

Date Written: 2004

Abstract

This paper analyzes the persistence of firms' exporting behavior in a panel of West German manufacturing firms. Dynamic binary choice models allow us to distinguish between true and spurious state dependence in firm performance. Using random effects models as well as a recent fixed effect approach which imposes few restrictions on unobservables, we find robust evidence of state dependence in the current export status of firms. Unobserved permanent firm heterogeneity (spurious state dependence) is found to be less important than suggested by earlier studies. The existence of true state dependence in exports has direct economic policy implications: if policy successfully turns non-exporters into exporters, the effect is likely to be lasting.

Keywords: State dependence, export activity, dynamic binary choice models

JEL Classification: C23, D21

Suggested Citation

Kaiser, Ulrich and Kongsted, Christian, True Versus Spurious State Dependence in Firm Performance: The Case of West German Exports (2004). ZEW - Centre for European Economic Research Discussion Paper No. 04-081. Available at SSRN: https://ssrn.com/abstract=633084 or http://dx.doi.org/10.2139/ssrn.633084

Ulrich Kaiser (Contact Author)

University of Southern Denmark - Faculty of Social Sciences ( email )

Campusvej 55
DK-5230 Odense M
Denmark

HOME PAGE: http://www.sam.sdu.dk/staff/uka

Center for Economic and Business Research (CEBR) ( email )

Porcelaenshaven, Bldg 65
DK-2000 Frederiksberg
Denmark

HOME PAGE: http://www.cebr.dk/uk

Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

HOME PAGE: http://www.zew.de/de/mitarbeiter/mitarbeiter.php3?action=mita&kurz=uka

Christian Kongsted

University of Copenhagen - Department of Economics ( email )

Ă˜ster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark

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