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Export Market Dynamics and Plant-Level Productivity: Impact of Tariff Reductions and Exchange-Rate Cycles

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  • John Baldwin
  • Beiling Yan

Abstract

This paper examines how trade liberalization and fluctuations in real exchange rates affect export-market entry/exit and plant-level productivity. It uses the experience of Canadian manufacturing plants over three separate periods that featuring different rates of bilateral tariff reduction and differing movements in bilateral real exchange rates. The patterns of entry and exit responses as well as the productivity outcomes differ markedly in the three periods. Consistent with much of the recent literature, the paper finds that plants self-select into export markets-that is, more efficient plants are more likely to enter and less likely to exit export markets. The reverse also occurs: entrants to export markets improve their productivity performance relative to the population from which they originated and plants that stay in export markets do better than comparable plants that exited, lending support to the thesis that exporting boosts productivity. Finally, we find that overall market access conditions, including real exchange rate trends, significantly affect the extent of productivity gains to be derived from participating in export markets. In particular, the increase in the value of the Canadian dollar during the post-2002 period almost completely offset the productivity growth advantages that new export-market participants would otherwise have enjoyed.
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Suggested Citation

  • John Baldwin & Beiling Yan, 2012. "Export Market Dynamics and Plant-Level Productivity: Impact of Tariff Reductions and Exchange-Rate Cycles," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(3), pages 831-855, September.
  • Handle: RePEc:bla:scandj:v:114:y:2012:i:3:p:831-855
    DOI: j.1467-9442.2012.01716.x
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    Cited by:

    1. John R. Baldwin & Wulong Gu & Beiling Yan, 2013. "Export Growth, Capacity Utilization, and Productivity Growth: Evidence from the Canadian Manufacturing Plants," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 59(4), pages 665-688, December.
    2. Peter S. Spiro, 2013. "A Sectoral Analysis of Ontario's Weak Productivity Growth," International Productivity Monitor, Centre for the Study of Living Standards, vol. 25, pages 20-35, Fall.
    3. John Baldwin & Amélie Lafrance, 2014. "Firm Turnover and Productivity Growth in Canadian Manufacturing and Services Industries, 2000 to 2007," Journal of Industry, Competition and Trade, Springer, vol. 14(2), pages 173-205, June.
    4. Jen Baggs & Eugene Beaulieu & Loretta Fung & Beverly Lapham, 2016. "Firm Dynamics in Retail Trade: The Response of Canadian Retailers to Exchange Rate Shocks," Review of International Economics, Wiley Blackwell, vol. 24(3), pages 635-666, August.
    5. Itai Agur, 2016. "Products and Provinces; A Disaggregated Panel Analysis of Canada’s Manufacturing Exports," IMF Working Papers 16/193, International Monetary Fund.
    6. Nazli Karamollaoglu & M. Ege Yazgan, 2014. "Firm Exit and Exchange Rates: An Examination with Turkish Firm-Level Data," Koç University-TUSIAD Economic Research Forum Working Papers 1411, Koc University-TUSIAD Economic Research Forum.

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