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Exports and Profitability - First Evidence for German Manufacturing Firms

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  • Helmut Fryges

    ()
    (ZEW Centre for European Economic Research)

  • Joachim Wagner

    ()
    (Institute of Economics, University of 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 selfselection 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 University of Lüneburg, Institute of Economics in its series Working Paper Series in Economics with number 102.

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Length: 55 pages
Date of creation: Oct 2008
Date of revision:
Handle: RePEc:lue:wpaper:102

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Keywords: exports; profitability; micro data; Germany;

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References

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  1. 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, Elsevier, vol. 72(1), pages 52-74, May.
  2. Lucia Foster & John Haltiwanger & Chad Syverson, 2005. "Reallocation, Firm Turnover, and Efficiency: Selection on Productivity or Profitability?," Working Papers 05-11, Center for Economic Studies, U.S. Census Bureau.
  3. Joachim Wagner, 2007. "Exports and Productivity ?Comparable Evidence for 14 Countries," LICOS Discussion Papers, LICOS - Centre for Institutions and Economic Performance, KU Leuven 19207, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  4. Fryges, Helmut & Wagner, Joachim, 2007. "Exports and Productivity Growth: First Evidence from a Continuous Treatment Approach," ZEW Discussion Papers 07-032, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  5. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2007. "Firms in International Trade," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 21(3), pages 105-130, Summer.
  6. Joachim Wagner, 2005. "Exports and Productivity: A Survey of the Evidence fro Firm Level Data," International Trade, EconWPA 0504005, EconWPA.
  7. Schmalensee, Richard, 1989. "Inter-industry studies of structure and performance," Handbook of Industrial Organization, Elsevier, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 16, pages 951-1009 Elsevier.
  8. 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.
  9. Leslie E. Papke & Jeffrey M. Wooldridge, 1993. "Econometric Methods for Fractional Response Variables with an Application to 401(k) Plan Participation Rates," NBER Technical Working Papers 0147, National Bureau of Economic Research, Inc.
  10. Thierry Mayer & Gianmarco Ottaviano, 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.
  11. repec:spo:wpecon:info:hdl:2441/10147 is not listed on IDEAS
  12. Gianmarco Ottaviano & Thierry Mayer, . "The happy few: the internationalisation of European firms," Blueprints, Bruegel, number 12, December.
  13. 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).
  14. 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, Springer, vol. 144(4), pages 596-635, December.
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Citations

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Cited by:
  1. Lodefalk, Magnus, 2012. "The Role of Services for Manufacturing Firms’ Exports," Working Papers, Örebro University, School of Business 2012:10, Örebro University, School of Business.
  2. Sarbu, Miruna, 2013. "Does social software increase labour productivity?," ZEW Discussion Papers 13-041, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  3. Alexander Vogel, 2009. "Exporter Performance in the German Business Services Sector: First Evidence from the Services Statistics Panel," Working Paper Series in Economics, University of Lüneburg, Institute of Economics 111, University of Lüneburg, Institute of Economics.
  4. 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, Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 231(3), pages 379-414, June.
  5. Joachim Wagner, 2011. "International Trade and Firm Performance: A Survey of Empirical Studies since 2006," Working Paper Series in Economics, University of Lüneburg, Institute of Economics 210, University of Lüneburg, Institute of Economics.
  6. 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, Elsevier, vol. 25(C), pages 146-158.
  7. 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, University of Lüneburg, Institute of Economics 227, University of Lüneburg, Institute of Economics.
  8. Joachim Wagner, 2012. "Exports, Imports and Profitability: First Evidence for Manufacturing Enterprises," Open Economies Review, Springer, Springer, vol. 23(5), pages 747-765, November.
  9. Fulvio Castellacci, 2014. "Service Firms Heterogeneity, International Collaborations and Export Participation," Journal of Industry, Competition and Trade, Springer, Springer, vol. 14(2), pages 259-285, June.
  10. Marco Grazzi, 2009. "Trade and Profitability: Is there an export premium? Evidence from Italian manufacturing firms," LEM Papers Series, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy 2009/16, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  11. Ehrl, Philipp, 2013. "Agglomeration economies with consistent productivity estimates," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 43(5), pages 751-763.
  12. Joachim Wagner, 2011. "Productivity and International Firm Activities: What do we know?," Working Paper Series in Economics, University of Lüneburg, Institute of Economics 194, University of Lüneburg, Institute of Economics.

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