Size rationalization and trade exposure in developing countries

Given the lack of direct evidence regarding industrial adjustment in response to trade liberalization, this paper tackles some very basic questions. Specifically, in LDCs, how is trade orientation correlated with the size distribution of plants and with plant-level labor productivity? It begins with a simple model that summarizes some effects of trade exposure on producer size and productive efficiency that have been stressed in the recent analytical and simulation literature. It then examines annual plant-level data from Chile and Colombia to determine whether these effects can be confirmed. The empirical results indicate that, over the long run, higher trade exposure is correlated with smaller plant sizes, controlling for industry and country effects. However, the mix of high versus low productivity plants is not strongly associated with trade exposure. Both of these findings cast doubt on the mechanisms linking trade, plant size, and productivity in a number of recent analytical and simulation studies.Economic Theory&Research,Environmental Economics&Policies,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Trade Policy,Science Education

An empirical model of sunk costs and the decision to export

Exports respond unpredictably to a change in real exchange rates, suggests evidence from the 1980s. Recent theoretical work explains this as a consequence of the sunk costs associated with breaking into foreign markets. Sunk costs include the cost of packaging, upgrading product quality, establishing marketing channels, and accumulating information on demand sources. The authors use micro panel data to estimate a dynamic discrete-choice model of participation in export markets, a model derived from the Krugman-Baldwin sunk-cost hysteresis framework. Applying the model to data on manufacturing plants in Colombia (1981-89), they test for the presence of sunk entry costs and quantify the importance of those costs in explaining export patterns. The econometric results reject the hypothesis that sunk costs are zero. The results, which control for both observed and unobserved sources of plant heterogeneity, indicate that prior export market experience has a substantial effect on the probability of exporting, but its effect depreciates fairly quickly. The reentry costs of plants that have been out of the export market for a year are substantially lower than the costs of a first-time exporter. After a year out of the export market, however, the reentry costs are not significantly different from the entry costs. Plant characteristics are also associated with export behavior: large old plants owned by corporations are more likely to export than other plants. Variations in plant-level cost and demand conditions have much less effect on the profitability of exporting than variations in macroeconomic conditions and sunk costs do. It appears especially difficult to break into foreign markets during periods of world recession.Economic Theory&Research,Markets and Market Access,Environmental Economics&Policies,Decentralization,Water Conservation,Environmental Economics&Policies,Economic Theory&Research,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Markets and Market Access,Access to Markets

Market entry costs, producer heterogeneity and export dynamics

As the exchange rate, foreign demand, production costs and export promotion policies evolve, manufacturing firms are continually faced with two issues: whether to be an exporter, and if so, how much to export. we develop a dynamic structural model of export supply that characterizes these two decisions and estimate the model using plant-level panel data on Colombian chemical producers. The model embodies uncertainty, plant-level heterogeneity in export profits, and sunk entry costs for plants breaking into foreign markets. Our estimates, and the simulation exercises that they support, yield several implications. First, entry costs are typically large, but vary greatly across proucers. second, there is substantial cross-plant heterogeneity in gross expected export profit streams. Third, these large entry costs make expectations about future exporting conditions important for many producers, so changes in the exchange rate regime that are credible induce much more entry than those that are not. Fourth, however, most of the entry and exit takes place among marginal exporters who contribute little to aggregate export revenues. Finally, subsidies on export earnings have much large impact on export revenues(per dollar spent)than subsidies that reduce the entry costs faced by new exporters.

Market Entry Costs, Producer Heterogeneity, and Export Dynamics

As the exchange rate, foreign demand, production costs and export promotion policies evolve, manufacturing firms are continually faced with two issues: Whether to be an exporter, and if so, how much to export. We develop a dynamic structural model of export supply that characterizes these two decisions and estimate the model using plant-level panel data on Colombian chemical producers. The model embodies uncertainty, plant-level heterogeneity in export profits, and sunk entry costs for plants breaking into foreign markets. Our estimates, and the simulation exercises that they support, yield several implications. First, entry costs are typically large, but vary greatly across producers. Second, there is substantial cross-plant heterogeneity in gross expected export profit streams. Third, these large entry costs make expectations about future exporting conditions important for many producers, so changes in the exchange rate regime that are credible induce much more entry than those that are not. Fourth, however, most of the entry and exit takes place among marginal exporters who contribute little to aggregate export revenues. Finally, subsidies on export earnings have a much larger impact on export revenues (per dollar spent) than subsidies that reduce the entry costs faced by new exporters.

LA DECISIÓN DE EXPORTAR EN COLOMBIA: UN MODELO EMPÍRICO DE ENTRADA CON COSTOS HUNDIDOS

Recientes modelos teóricos de entrada predicen que, en presencia de costos hundidos, la participación en el mercado se afecta por la experiencia previa. Este estudio cuantifica el efecto que tienen las experiencias pasadas de exportación en las decisiones que toman las plantas manufactureras colombianas de participar en los mercados externos.

Design and pilot results of a single blind randomized controlled trial of systematic demand-led home visits by nurses to frail elderly persons in primary care [ISRCTN05358495]

BACKGROUND: The objective of this article is to describe the design of an evaluation of the cost-effectiveness of systematic home visits by nurses to frail elderly primary care patients. Pilot objectives were: 1. To determine the feasibility of postal multidimensional frailty screening instruments; 2. to identify the need for home visits to elderly. METHODS: Main study: The main study concerns a randomized controlled in primary care practices (PCP) with 18 months follow-up and blinded PCPs. Frail persons aged 75 years or older and living at home but neither terminally ill nor demented from 33 PCPs were eligible. Trained community nurses (1) visit patients at home and assess the care needs with the Resident Assessment Instrument-Home Care, a multidimensional computerized geriatric assessment instrument, enabling direct identification of problem areas; (2) determine the care priorities together with the patient; (3) design and execute interventions according to protocols; (4) and visit patients at least five times during a year in order to execute and monitor the care-plan. Controls receive usual care. Outcome measures are Quality of life, and Quality Adjusted Life Years; time to nursing home admission; mortality; hospital admissions; health care utilization. Pilot 1: Three brief postal multidimensional screening measures to identify frail health among elderly persons were tested on percentage complete item response (selected after a literature search): 1) Vulnerable Elders Screen, 2) Strawbridge's frailty screen, and 3) COOP-WONCA charts. Pilot 2: Three nurses visited elderly frail patients as identified by PCPs in a health center of 5400 patients and used an assessment protocol to identify psychosocial and medical problems. The needs and experiences of all participants were gathered by semi-structured interviews. DISCUSSION: The design holds several unique elements such as early identification of frail persons combined with case-management by nurses. From two pilots we learned that of three potential postal frailty measures, the COOP-WONCA charts were completed best by elderly and that preventive home visits by nurses were positively evaluated to have potential for quality of care improvement