The U-Shaped Productivity Dynamics of French Exporters

Flora Bellone (1) , Patrick Musso (1) , Lionel Nesta (2) , Michel Quéré (1)

1 GREDEG - Groupe de Recherche en Droit, Economie et Gestion
2 OFCE - Observatoire français des conjonctures économiques (Sciences Po)

Sunk costs due to entry into foreign markets are used as the main justification of the relationship between firm productivity and exports. We use a large-scale dataset on French manufacturing firms to evaluate how sunk costs affect the productivity of new exporters. We find that the typical productivity dynamics of a new exporter is U-shaped. Prior to entry into export markets, firm productivity temporarily decreases. It recovers contemporaneously with entry, as the benefits from sales to foreign markets are harvested. This pattern is more pronounced for intensively exporting firms and for firms operating in capital intensive or high technology sectors.

Domains: Economics and Finance

Flora Bellone, Patrick Musso, Lionel Nesta, Michel Quéré. The U-Shaped Productivity Dynamics of French Exporters. 2007. ⟨hal-00973046⟩