TY - UNPB

T1 - True Versus Spurious State Dependence in Firm Performance

T2 - The Case of German Exports

AU - Kaiser, Ulrich

AU - Kongsted, Hans Christian

N1 - JEL Classification: C23, D21

PY - 2007

Y1 - 2007

N2 - This paper analyzes the persistence of firms' exporting behavior in a panel of German manufacturing firms using dynamic binary choice models. We distinguish between true and spurious state dependence in exports and apply fixed effects methods that allow us to verify the robustness of our results to critical assumptions on firms' initial export status. We find robust evidence of state dependence in the current export status of firms. We also document an important role of unobserved permanent firm heterogeneity ("spurious state dependence") and quantify the relative importance of different export determinants. Our results, which are consistent with the findings of previous studies on firms in developing countries and in the United States, show the presence of important sunk costs in export market entry and a depreciation of knowledge and experience in export markets

AB - This paper analyzes the persistence of firms' exporting behavior in a panel of German manufacturing firms using dynamic binary choice models. We distinguish between true and spurious state dependence in exports and apply fixed effects methods that allow us to verify the robustness of our results to critical assumptions on firms' initial export status. We find robust evidence of state dependence in the current export status of firms. We also document an important role of unobserved permanent firm heterogeneity ("spurious state dependence") and quantify the relative importance of different export determinants. Our results, which are consistent with the findings of previous studies on firms in developing countries and in the United States, show the presence of important sunk costs in export market entry and a depreciation of knowledge and experience in export markets

KW - Faculty of Social Sciences

KW - state dependence

KW - export activity

KW - dynamic binary choice models

KW - fixed effects

M3 - Working paper

BT - True Versus Spurious State Dependence in Firm Performance

PB - Centre for Industrial Economics, Department of Economics, University of Copenhagen

ER -