Heterogeneous Exporter Behaviour: Exploring the Evidence for Sunk-Costs and Hysteresis

Recent economic literature suggests the importance of sunk costs and hysteresis in explaining export patterns in international trade. To explore their empirical importance, we present a new conceptual framework that distinguishes six different types of exporter behaviour, and apply this framework to a unique longitudinal data set on Irish manufacturing. Our analysis allows us to identify significant numbers of manufacturers who engage in "exporter re-switching behaviour". The magnitude of these numbers leads us to question the widespread importance of sunk costs. In response to export-market shocks, we find strong evidence of both heterogeneous exporter responses and hysteresis.