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Exports and Profitability: First Evidence for German Manufacturing Firms

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  • Fryges, Helmut

    ()
    (ZEW Mannheim)

  • Wagner, Joachim

    ()
    (Leuphana University Lüneburg)

Abstract

Using unique recently released nationally representative high-quality longitudinal data at the enterprise level 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 percent 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.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3798.

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Length: 48 pages
Date of creation: Oct 2008
Date of revision:
Publication status: published in: World Economy, 2010, 33 (3), 399-423
Handle: RePEc:iza:izadps:dp3798

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Keywords: exports; profitability; micro data; Germany;

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References

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  1. Foster, Lucia & Haltiwanger, John C. & Syverson, Chad, 2005. "Reallocation, Firm Turnover, and Efficiency: Selection on Productivity or Profitability?," IZA Discussion Papers 1705, Institute for the Study of Labor (IZA).
  2. Helmut Fryges & Joachim Wagner, 2007. "Exports and Productivity Growth - First Evidence from a Continuous Treatment Approach," Jena Economic Research Papers 2007-063, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  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. The International Study Group on Exports and Productivity & Mauro Pisu, 2008. "Exports and productivity – comparable evidence for 14 countries," Working Paper Research 128, National Bank of Belgium.
  5. 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).
  6. Joachim Wagner, 2005. "Exports and Productivity: A Survey of the Evidence fro Firm Level Data," International Trade 0504005, EconWPA.
  7. 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..
  8. Gianmarco Ottaviano & Thierry Mayer, . "The happy few: the internationalisation of European firms," Blueprints, Bruegel, number 12, June.
  9. Thorsten Schank & Claus Schnabel & Joachim Wagner, 2006. "Do exporters really pay higher wages? First evidence from German linked employer-employee data," Working Paper Series in Economics 28, University of Lüneburg, Institute of Economics.
  10. Schmalensee, Richard., 1987. "Inter-industry studies of structure and performance," Working papers 1874-87., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  11. 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.
  12. 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.
  13. repec:spo:wpecon:info:hdl:2441/10147 is not listed on IDEAS
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Citations

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Cited by:
  1. Ehrl, Philipp, 2013. "Agglomeration economies with consistent productivity estimates," Regional Science and Urban Economics, Elsevier, vol. 43(5), pages 751-763.
  2. 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.
  3. Wagner, Joachim, 2011. "Exports, Imports and Profitability: First Evidence for Manufacturing Enterprises," IZA Discussion Papers 5766, Institute for the Study of Labor (IZA).
  4. 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.
  5. 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.
  6. 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.
  7. Wagner, Joachim, 2011. "Productivity and International Firm Activities: What Do We Know?," IZA Policy Papers 23, Institute for the Study of Labor (IZA).
  8. Sarbu, Miruna, 2013. "Does social software increase labour productivity?," ZEW Discussion Papers 13-041, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  9. Temouri, Yama & Vogel, Alexander & Wagner, Joachim, 2013. "Self-selection into export markets by business services firms – Evidence from France, Germany and the United Kingdom," Structural Change and Economic Dynamics, Elsevier, vol. 25(C), pages 146-158.
  10. 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.
  11. 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.

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