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Maria Persson

Docent, Programchef - Masterprogram i nationalekonomi

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How to combine high sunk costs of exporting and low export survival

Författare

  • Joakim Gullstrand
  • Maria Persson

Summary, in English

In endeavouring to explain the empirical puzzle that the sunk costs of exporting are important, but that, at

the same time, trade flows do not, on average, survive for very long, this paper explores the concepts of

core and peripheral markets. First, it illustrates that if the importance of sunk costs as well as the expected

future returns from exporting are different, depending on whether the export decision refers to a core or a

peripheral market, it is plausible that while firms will tend to stay on the core market for a long time, they

will enter and exit the peripheral market much more frequently. Second, using firm-product-destinationspecific

export data for all firms in the Swedish food chain for the period 1997–2007, an empirical test is

carried out to ascertain whether there is support for the hypothesis that trade duration will be longer for

core markets. Employing two variables that capture different aspects of the core/periphery dimension, it is

found that firms will indeed tend to stay longer in their core markets, while export decisions regarding

peripheral markets are much less long-term. The conclusion, therefore, is that the empirical puzzle can be

explained by taking into account the fact that the trade hysteresis literature builds on data on the core

market decision to export or not, while the trade survival literature also includes data on decisions to stay

in or exit peripheral markets.

Avdelning/ar

  • Nationalekonomiska institutionen

Publiceringsår

2015

Språk

Engelska

Sidor

23-51

Publikation/Tidskrift/Serie

Review of World Economics

Volym

151

Issue

1

Dokumenttyp

Artikel i tidskrift

Förlag

Springer

Ämne

  • Economics and Business

Aktiv

Published

ISBN/ISSN/Övrigt

  • ISSN: 1610-2878