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Export mode, Trade Costs, and Productivity Sorting

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  • Ronald B Davies

    (University College Dublin)

  • Tine Jeppesen

    (University College Dublin)

Abstract

In this paper we directly test the proposed productivity hierarchy of direct, indirect and non-exporters using firm-level data from 105 developing and transition countries. Using both regression analysis and propensity score matching, we find strong evidence to suggest that direct exporters are on average more productive than both indirect and non-exporters. However, only the results obtained using regression analysis support a similar ranking between indirect and non-exporters. Furthermore, we test the underlying relationship between source-specific fixed trade costs and the average productivity differences between the three firm-types. We find a significant and positive relation between such costs and the average productivity premium of direct exporters only. While other studies have shown that exports by trade intermediaries increase with destination-specific fixed costs, our results suggest that this is also true for source-specific costs, as an increase in the average productivity of direct exporters indicate that a larger share of less productive direct exporters choose to make use of a trade intermediary as export costs rise.

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File URL: http://www.ucd.ie/t4cms/WP12_25.pdf
File Function: First version, 2012
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Bibliographic Info

Paper provided by School Of Economics, University College Dublin in its series Working Papers with number 201225.

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Length: 63 pages
Date of creation: 04 Oct 2012
Date of revision:
Handle: RePEc:ucn:wpaper:201225

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Keywords: Heterogeneous firms; Export mode; Exporting Costs;

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  1. Marco Caliendo & Sabine Kopeinig, 2005. "Some Practical Guidance for the Implementation of Propensity Score Matching," Discussion Papers of DIW Berlin 485, DIW Berlin, German Institute for Economic Research.
  2. Dimitra Petropoulou, 2007. "Information Costs, Networks and Intermediation in International Trade," Economics Series Working Papers 370, University of Oxford, Department of Economics.
  3. Felbermayr, Gabriel & Jung, Benjamin, 2011. "Trade intermediation and the organization of exporters," Munich Reprints in Economics 20574, University of Munich, Department of Economics.
  4. Fergal McCann, 2010. "Indirect exporters," PSE - G-MOND WORKING PAPERS halshs-00963335, HAL.
  5. Shang-Jin Wei & Jaebin Ahn & Amit K. Khandelwal, 2010. "The Role of Intermediaries in Facilitating Trade," Working Papers id:2557, eSocialSciences.
  6. Catherine A. Pattillo & Taye Mengistae, 2002. "Export Orientation and Productivity in Sub-Saharan Africa," IMF Working Papers 02/89, International Monetary Fund.
  7. Gary Biglaiser, 1993. "Middlemen as Experts," RAND Journal of Economics, The RAND Corporation, vol. 24(2), pages 212-223, Summer.
  8. Jennifer Abel-Koch, 2011. "Firm Size and the Choice of Export Mode," Working Papers 1105, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz, revised 29 Mar 2011.
  9. Flam, Harry & Helpman, Elhanan, 1987. "Industrial policy under monopolistic competition," Journal of International Economics, Elsevier, vol. 22(1-2), pages 79-102, February.
  10. Andrew B. Bernard & Marco Grazzi & Chiara Tomasi, 2011. "Intermediaries in International Trade: Direct versus indirect modes of export," NBER Working Papers 17711, National Bureau of Economic Research, Inc.
  11. Demidova, Svetlana & Rodríguez-Clare, Andrés, 2009. "Trade policy under firm-level heterogeneity in a small economy," Journal of International Economics, Elsevier, vol. 78(1), pages 100-112, June.
  12. James E. Rauch & Joel Watson, 2004. "Network Intermediaries in International Trade," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(1), pages 69-93, 03.
  13. Fergal McCann, 2010. "Indirect Exporters," Working Papers 2010-22, CEPII research center.
  14. Fergal McCann, 2010. "Indirect exporters," Working Papers halshs-00963335, HAL.
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