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Estimating productivity with multi-product firms, pricing heterogeneity and the role of international trade

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  • Smeets, Valerie
  • Warzynski, Frederic

Abstract

In this paper, we analyze the relationship between exports, imports and firm productivity taking into account pricing heterogeneity and multi-product firms. We use a rich firm–product level dataset providing both revenue and quantities of all products produced, exported and imported for a large panel of Danish manufacturing firms over the period 1999–2006. With this detailed information, we compute a firm level price index to deflate our measure of output and compare our productivity measures when we deflate output with an industry-level deflator. We find that firms only importing have a large productivity premium, but not firms only involved in exporting, while firms involved in both importing and exporting are the most productive. The international trade premia are found to be significantly larger when output is deflated with our firm-specific price index rather than the traditional sector-level PPI, suggesting that pricing heterogeneity plays an important role in productivity measurement. We also find evidence of a self-selection into exporting but not into importing. Finally, we detect the presence of learning by exporting only when we control for pricing heterogeneity; when looking at learning by importing, we find a positive effect in the long run, but the effect is lower when we deflate revenue with a firm-specific price index. These results suggest that pricing heterogeneity can significantly affect the way we measure productivity and our assessment about the link between productivity and trade.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 90 (2013)
Issue (Month): 2 ()
Pages: 237-244

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Handle: RePEc:eee:inecon:v:90:y:2013:i:2:p:237-244

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Web page: http://www.elsevier.com/locate/inca/505552

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Keywords: Productivity estimation; Pricing heterogeneity; International trade decisions; Multi-product firms;

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Cited by:
  1. David Aristei & Davide Castellani & Chiara Franco, 2013. "Firms’ exporting and importing activities: is there a two-way relationship?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 149(1), pages 55-84, March.
  2. Ling Feng & Zhiyuan Li & Deborah L. Swenson, 2012. "The Connection between Imported Intermediate Inputs and Exports: Evidence from Chinese Firms," NBER Working Papers 18260, National Bureau of Economic Research, Inc.
  3. Carlo Altomonte & Tommaso Aquilante & Gábor Békés & Gianmarco I.P. Ottaviano, 2013. "Internationalization and innovation of firms: evidence and policy," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 28(76), pages 663-700, October.
  4. Alvaro Garcia Marin & Nico Voigtländer, 2013. "Exporting and Plant-Level Efficiency Gains: It’s in the Measure," NBER Working Papers 19033, National Bureau of Economic Research, Inc.
  5. A. R. Lamorgese & A. Linarello & Frederic Warzynski, 2014. "Free Trade Agreements and Firm-Product Markups in Chilean Manufacturing," Economics Working Papers, School of Economics and Management, University of Aarhus 2014-16, School of Economics and Management, University of Aarhus.

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