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Adding Rungs to the Exporting Ladder: Plant-Level Exporting Dynamics and Total Factor Productivity Growth

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  • Alexandru Voicu
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    Abstract

    We use panel data on Mexican manufacturing plants to study the dynamics of plant-level exporting activity at both the extensive and the intensive margins and the connection between exporting dynamics and plant-level total factor productivity growth. We find that exporting activity has a ladder structure. Most entries and exits take place at the bottom of the ladder and account for a small share of gross, industry-level changes in exports, employment, output, and productivity. The dynamics at the intensive margin is intense and heterogeneous. Plant mobility across deciles of export distribution has an inverted J-shape, top exporters being least likely to experience significant changes in their relative position. Simultaneously, similar shares of plants gradually move up and down the export ladder and changes in plants’ relative position in the distribution of exports are positively correlated with changes in total factor productivity. Our results suggest that plants face not only fixed costs of entry, but also pre-entry uncertainty about conditions in the foreign markets and post-entry convex costs of adjusting their exporting activity and, as a result, a significant share of the productivity gains from trade accrues long after entry, when plants become large exporters.

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    Bibliographic Info

    Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c013_013.

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    Length: 45 pages
    Date of creation: Nov 2008
    Date of revision:
    Handle: RePEc:deg:conpap:c013_013

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    Related research

    Keywords: NAFTA; trade liberalization; productivity; heterogeneity of plant-level performance;

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    1. Daniel S. Hamermesh & Gerard A. Pfann, 1996. "Adjustment Costs in Factor Demand," Journal of Economic Literature, American Economic Association, vol. 34(3), pages 1264-1292, September.
    2. Bentolila, Samuel & Bertola, Giuseppe, 1990. "Firing Costs and Labour Demand: How Bad Is Eurosclerosis?," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 57(3), pages 381-402, July.
    3. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2000. "Plants and Productivity in International Trade," Boston University - Institute for Economic Development, Boston University, Institute for Economic Development 105, Boston University, Institute for Economic Development.
    4. Matteo Bugamelli & Luigi Infante, 2003. "Sunk Costs of Exports," Temi di discussione (Economic working papers), Bank of Italy, Economic Research and International Relations Area 469, Bank of Italy, Economic Research and International Relations Area.
    5. Roberts, Mark J & Tybout, James R, 1997. "The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs," American Economic Review, American Economic Association, American Economic Association, vol. 87(4), pages 545-64, September.
    6. Garrick Blalock & Sonali Roy, 2007. "A Firm-level Examination of the Exports Puzzle: Why East Asian Exports Didn't Increase After the 1997-1998 Financial Crisis," The World Economy, Wiley Blackwell, vol. 30(1), pages 39-59, 01.
    7. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, American Economic Association, vol. 94(1), pages 300-316, March.
    8. Davis, Steven J. & Haltiwanger, John, 1999. "Gross job flows," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 41, pages 2711-2805 Elsevier.
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