Review of World Economics

, 147:643 | Cite as

Exports, investment and firm-level sales volatility

Original Paper

Abstract

This paper presents a dynamic model of risk-averse producers’ decision to invest in physical capital and to export. The model features irreversible investment, no capital markets and fixed and sunk costs to export. Several features of the distribution of investment rates and export participation patterns observed in firm-level data are closely matched in a calibration exercise. Counterfactual experiments show that large adjustments in total sales associated with entry into foreign markets increase the volatility of total sales for exporting firms.

Keywords

Exports Investment Uncertainty 

JEL Classification

F12 E22 

Notes

Acknowledgments

I would like to thank Jim Tybout, Eugenia Gonzalez, Andreas Hoefele, Andrés Rodríguez-Clare, Erdal Yalcin, Ruilin Zhou, two anonymous referees and participants at ETSG 2010, the Ifo/GEP Conference on Products, Markets and Export Dynamics and the Spring 2010 Midwest International Trade Meetings for useful comments. Financial support from COLFUTURO is gratefully acknowledged.

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Copyright information

© Kiel Institute 2011

Authors and Affiliations

  1. 1.University of Nottingham, GEP and CESifoNottinghamUK

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