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Exporting, Productivity and Government Interventions: Is There a Link?

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  • Elena Besedina

    ()
    (Kyiv School of Economics, Kyiv Economic Institute)

Abstract

Recent theoretical models postulate that only the most productive firms become exporters due to the existence of costs of exporting. Empirical evidence does suggest that exporters are on average more productive than their domestic counterparts. However, contrary to the theory the productivity distribution for exporters and non-exporters overlaps. Motivated by this empirical finding, I extend an existing model of heterogeneous firms by adding endogenous trade policy based on a political economy argument. Using Ukrainian data I identify firms that receive explicit government support in the form of preferential tax policy, subsidies and other exclusive benefits. I find that explicit political support is positively associated with firms’ size, voter turnout and state ownership but not efficiency.

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File URL: http://repec.kse.org.ua/pdf/KSE_dp28.pdf
File Function: June 2010
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Bibliographic Info

Paper provided by Kyiv School of Economics in its series Discussion Papers with number 28.

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Date of creation: Jun 2010
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Handle: RePEc:kse:dpaper:28

Note: Submitted to International Economic Review
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Keywords: TFP; Exporting; Subsidy; Electoral Competition;

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  1. James Levinsohn & Amil Petrin, 2000. "Estimating Production Functions Using Inputs to Control for Unobservables," NBER Working Papers 7819, National Bureau of Economic Research, Inc.
  2. Andrew B. Bernard & Stephen Redding & Peter K. Schott, 2004. "Comparative Advantage and Heterogeneous Firms," NBER Working Papers 10668, National Bureau of Economic Research, Inc.
  3. Mark J. Melitz, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," NBER Working Papers 8881, National Bureau of Economic Research, Inc.
  4. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, Elsevier, vol. 18(1-2), pages 83-100, February.
  5. 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.
  6. Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers, Tel Aviv 21-92, Tel Aviv.
  7. Mirabelle Muûls & Dimitra Petropoulou, 2008. "A Swing-State Theory of Trade Protection in the Electoral College," CEP Discussion Papers, Centre for Economic Performance, LSE dp0849, Centre for Economic Performance, LSE.
  8. Bernard, Andrew B & Jones, Charles I, 1996. "Comparing Apples to Oranges: Productivity Convergence and Measurement across Industries and Countries," American Economic Review, American Economic Association, American Economic Association, vol. 86(5), pages 1216-38, December.
  9. Andreyeva Tatiana, 2003. "Company Performance in Ukraine: What Governs its Success," EERC Working Paper Series, EERC Research Network, Russia and CIS 03-01e, EERC Research Network, Russia and CIS.
  10. Grossman, Gene M & Helpman, Elhanan, 1996. "Electoral Competition and Special Interest Politics," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 63(2), pages 265-86, April.
  11. Alla Lileeva & Daniel Trefler, 2007. "Improved Access to Foreign Markets Raises Plant-Level Productivity ... for Some Plants," NBER Working Papers 13297, National Bureau of Economic Research, Inc.
  12. Bombardini, Matilde, 2008. "Firm heterogeneity and lobby participation," Journal of International Economics, Elsevier, Elsevier, vol. 75(2), pages 329-348, July.
  13. Richard Baldwin, 2005. "Heterogeneous Firms and Trade: Testable and Untestable Properties of the Melitz Model," NBER Working Papers 11471, National Bureau of Economic Research, Inc.
  14. J. David Brown & John S. Earle, 2000. "Competition and Firm Performance: Lessons from Russia," William Davidson Institute Working Papers Series, William Davidson Institute at the University of Michigan 296, William Davidson Institute at the University of Michigan.
  15. Mara Faccio, 2006. "Politically Connected Firms," American Economic Review, American Economic Association, American Economic Association, vol. 96(1), pages 369-386, March.
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