This paper examines the complex and interdependent relationship between importing and exporting for a panel of Chinese manufacturing firms. We estimate the decision to import and export simultaneously within a dynamic random-effects bivariate probit framework addressing the endogenous initial conditions problem. Results show that decisions to export and import are simultaneously determined and that sunk-entry costs play a significant role in a firm's decision to enter international markets. Costs are larger for exporting. We also find a substitution effect between the two decisions. The substitutability between exporting and importing is greater for financially constrained private firms.
ASJC Scopus subject areas
- Geography, Planning and Development