Research Papers in Economics,
Stockholm University, Department of Economics

Abstract: Firms that engage in exporting normally enter their first export markets a number of years after beginning to sell locally, then enter subsequent export markets progressively. Standard trade models are essentially static and do not capture these elementary facts about exporting, which biases the estimation of trade patterns and limits understanding of potentially important aspects of firms’ exporting behaviour. This paper proposes a model for the timing of entry to new export markets. The model endogenously generates the timing of entry to each market through a learning mechanism: the fixed cost of entry to a given export market is reduced by the experience gained from having entered other markets. More productive firms are less sensitive to the learning effect and therefore (1) enter markets more quickly and (2) enter larger markets earlier and smaller markets later than less productive firms. These predictions are confirmed using Swedish firm-level data. The latter prediction in particular is difficult to explain using alternative mechanisms and therefore endorses the learning effect as an explanation for the timing of entry. The model additionally predicts that more productive firms export more widely and that firms of all productivity levels enter nearer markets earlier, which are strong features of the data.

Keywords: export market entry; learning by exporting; fixed costs; heterogeneous firms

JEL-codes: D83; F12; F17

50 pages, First version: May 5, 2011. Revised: April 20, 2012. Earlier revisions: August 24, 2011, October 17, 2011.

Full text files

wp11_17_revised3.pdf  

Download statistics

• Stockholm University, Department of Economics
• Ordering Working Papers
• Home page for this series

Questions (including download problems) about the papers in this series should be directed to Anne Jensen ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2024-02-05 17:13:48.