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Exports and Profitability: First Evidence for German Manufacturing Firms

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  • Helmut Fryges
  • Joachim Wagner

Abstract

Abstract Using unique recently released nationally representative high-quality longitudinal enterprise-level data for Germany, this paper presents the first comprehensive evidence on the relationship between exports and profitability. It documents that the positive profitability differential of exporters compared to non-exporters is statistically significant, though rather small, when observed firm characteristics and unobserved firm-specific effects are controlled for. In contrast to nearly all empirical studies on the relationship between productivity and exports we do not find any evidence for self-selection of more profitable firms into export markets. Due to the sampling frame of the data used we cannot test the hypothesis that firms which start exporting perform better in the years after the start than their counterparts which do not start. Instead, we use a newly developed continuous treatment approach and show that exporting improves the profitability almost over the whole range of the export-sales ratio. Only firms that generate 90 per cent and more of their total sales abroad do not benefit from exporting in terms of an increased rate of profit. This means that the usually observed higher productivity of exporters is not completely absorbed by the extra costs of exporting or by higher wages paid by internationally active firms. Copyright 2010 Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal World Economy.

Volume (Year): 33 (2010)
Issue (Month): 3 (03)
Pages: 399-423

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Handle: RePEc:bla:worlde:v:33:y:2010:i:3:p:399-423

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References

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  1. Lucia Foster & John Haltiwanger & Chad Syverson, 2005. "Reallocation, Firm Turnover, and Efficiency: Selection on Productivity or Profitability?," NBER Working Papers 11555, National Bureau of Economic Research, Inc.
  2. Gianmarco Ottaviano & Thierry Mayer, 2007. "The happy few: the internationalisation of European firms New facts based on firm-level evidence," Sciences Po publications info:hdl:2441/10147, Sciences Po.
  3. Bernard, Andrew & Jensen, J Bradford & Redding, Stephen J & Schott, Peter, 2007. "Firms in International Trade," CEPR Discussion Papers 6277, C.E.P.R. Discussion Papers.
  4. Helmut Fryges & Joachim Wagner, 2008. "Exports and Productivity Growth: First Evidence from a Continuous Treatment Approach," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 144(4), pages 695-722, December.
  5. Thierry Mayer & Gianmarco Ottaviano, 2008. "The Happy Few: The Internationalisation of European Firms," Intereconomics: Review of European Economic Policy, Springer, vol. 43(3), pages 135-148, May.
  6. Joachim Wagner, 2007. "Exports and Productivity – Comparable Evidence for 14 Countries," Working Paper Series in Economics 65, University of Lüneburg, Institute of Economics.
  7. Schank, Thorsten & Schnabel, Claus & Wagner, Joachim, 2007. "Do exporters really pay higher wages? First evidence from German linked employer-employee data," Journal of International Economics, Elsevier, vol. 72(1), pages 52-74, May.
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  9. Hennart, J.M.A., 2007. "The theoretical rationale for a multinationality - performance relationship," Open Access publications from Tilburg University urn:nbn:nl:ui:12-284201, Tilburg University.
  10. Joachim Wagner, 2005. "Exports and Productivity: A Survey of the Evidence fro Firm Level Data," International Trade 0504005, EconWPA.
  11. Schmalensee, Richard, 1989. "Inter-industry studies of structure and performance," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 16, pages 951-1009 Elsevier.
  12. International Study Group on Exports and Productivity (ISGEP), 2008. "Understanding Cross-Country Differences in Exporter Premia: Comparable Evidence for 14 Countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 144(4), pages 596-635, December.
  13. Papke, Leslie E & Wooldridge, Jeffrey M, 1996. "Econometric Methods for Fractional Response Variables with an Application to 401(K) Plan Participation Rates," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(6), pages 619-32, Nov.-Dec..
  14. Wagner, Joachim, 2002. "Unobserved firm heterogeneity and the size-exports nexus : evidence from German panel data," HWWA Discussion Papers 194, Hamburg Institute of International Economics (HWWA).
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Citations

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Cited by:
  1. Wagner, Joachim, 2011. "Exports, Imports and Profitability: First Evidence for Manufacturing Enterprises," IZA Discussion Papers 5766, Institute for the Study of Labor (IZA).
  2. Joachim Wagner, 2011. "Productivity and International Firm Activities: What do we know?," Working Paper Series in Economics 194, University of Lüneburg, Institute of Economics.
  3. Wagner, Joachim & Temouri, Yama & Vogel, Alexander, 2011. "Self-Selection into Export Markets by Business Services Firms: Evidence from France, Germany and the United Kingdom," Annual Conference 2011 (Frankfurt, Main): The Order of the World Economy - Lessons from the Crisis 48700, Verein für Socialpolitik / German Economic Association.
  4. Alexander Vogel, 2009. "Exporter Performance in the German Business Services Sector: First Evidence from the Services Statistics Panel," Working Paper Series in Economics 111, University of Lüneburg, Institute of Economics.
  5. Joachim Wagner, 2012. "International trade and firm performance: a survey of empirical studies since 2006," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 148(2), pages 235-267, June.
  6. Fulvio Castellacci, 2014. "Service Firms Heterogeneity, International Collaborations and Export Participation," Journal of Industry, Competition and Trade, Springer, vol. 14(2), pages 259-285, June.
  7. Magnus Lodefalk, 2014. "The role of services for manufacturing firm exports," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 150(1), pages 59-82, February.
  8. Ehrl, Philipp, 2013. "Agglomeration economies with consistent productivity estimates," Regional Science and Urban Economics, Elsevier, vol. 43(5), pages 751-763.
  9. Sebastian Petrick & Katrin Rehdanz & Ulrich J. Wagner, 2011. "Energy Use Patterns in German Industry: Evidence from Plant-level Data," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 231(3), pages 379-414, June.
  10. Sarbu, Miruna, 2013. "Does social software increase labour productivity?," ZEW Discussion Papers 13-041, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  11. Joachim Wagner, 2012. "New Methods for the Analysis of Links between International Firm Activities and Firm Performance: A Practitioner’s Guide," Working Paper Series in Economics 227, University of Lüneburg, Institute of Economics.
  12. Marco Grazzi, 2009. "Trade and Profitability: Is there an export premium? Evidence from Italian manufacturing firms," LEM Papers Series 2009/16, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.

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