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Estimating productivity with multi-product firms, pricing heterogeneity and the role of international trade

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  • Smeets, Valerie
  • Warzynski, Frederic

Abstract

In this paper, we analyze the relationship between exports, imports and firm productivity taking into account pricing heterogeneity and multi-product firms. We use a rich firm–product level dataset providing both revenue and quantities of all products produced, exported and imported for a large panel of Danish manufacturing firms over the period 1999–2006. With this detailed information, we compute a firm level price index to deflate our measure of output and compare our productivity measures when we deflate output with an industry-level deflator. We find that firms only importing have a large productivity premium, but not firms only involved in exporting, while firms involved in both importing and exporting are the most productive. The international trade premia are found to be significantly larger when output is deflated with our firm-specific price index rather than the traditional sector-level PPI, suggesting that pricing heterogeneity plays an important role in productivity measurement. We also find evidence of a self-selection into exporting but not into importing. Finally, we detect the presence of learning by exporting only when we control for pricing heterogeneity; when looking at learning by importing, we find a positive effect in the long run, but the effect is lower when we deflate revenue with a firm-specific price index. These results suggest that pricing heterogeneity can significantly affect the way we measure productivity and our assessment about the link between productivity and trade.

Suggested Citation

  • Smeets, Valerie & Warzynski, Frederic, 2013. "Estimating productivity with multi-product firms, pricing heterogeneity and the role of international trade," Journal of International Economics, Elsevier, vol. 90(2), pages 237-244.
  • Handle: RePEc:eee:inecon:v:90:y:2013:i:2:p:237-244
    DOI: 10.1016/j.jinteco.2013.01.003
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    Cited by:

    1. Bruce A. Blonigen & Justin R. Pierce, 2016. "Evidence for the Effects of Mergers on Market Power and Efficiency," Finance and Economics Discussion Series 2016-082, Board of Governors of the Federal Reserve System (U.S.).
    2. Carlo Altomonte & Tommaso Aquilante & Gábor Békés & Gianmarco I.P. Ottaviano, 2013. "Internationalization and innovation of firms: evidence and policy," Economic Policy, CEPR;CES;MSH, vol. 28(76), pages 663-700, October.
    3. Yao Amber Li & Valerie Smeets & Frederic Warzynski, 2017. "Processing Trade, Productivity and Prices: Evidence from a Chinese Production Survey," Economics Working Papers 2017-12, Department of Economics and Business Economics, Aarhus University.
    4. Feng, Ling & Li, Zhiyuan & Swenson, Deborah L., 2016. "The connection between imported intermediate inputs and exports: Evidence from Chinese firms," Journal of International Economics, Elsevier, vol. 101(C), pages 86-101.
    5. Alessandro Borin & Michele Mancini, 2016. "Foreign direct investment and firm performance: an empirical analysis of Italian firms," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 152(4), pages 705-732, November.
    6. Andrea Linarello, 2014. "Trade liberalization and domestic suppliers: evidence from Chile," Temi di discussione (Economic working papers) 994, Bank of Italy, Economic Research and International Relations Area.
    7. Carlsson, Mikael & Messina, Julián & Nordström Skans, Oskar, 2014. "Firm-level shocks and labor adjustments," Working Paper Series 2014:28, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    8. Joachim Wagner, 2016. "A survey of empirical studies using transaction level data on exports and imports," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 152(1), pages 215-225, February.
    9. INUI Tomohiko & KODAMA Naomi, 2016. "The Effects of Japanese Customer Firms' Overseas Outsourcing on Supplier Firms' Performance," Discussion papers 16106, Research Institute of Economy, Trade and Industry (RIETI).
    10. David Aristei & Davide Castellani & Chiara Franco, 2013. "Firms’ exporting and importing activities: is there a two-way relationship?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 149(1), pages 55-84, March.
    11. Alvaro Garcia Marin & Nico Voigtländer, 2013. "Exporting and Plant-Level Efficiency Gains: It's in the Measure," NBER Working Papers 19033, National Bureau of Economic Research, Inc.
    12. Sharma, Chandan & Mishra, Ritesh Kumar, 2015. "International trade and performance of firms: Unraveling export, import and productivity puzzle," The Quarterly Review of Economics and Finance, Elsevier, vol. 57(C), pages 61-74.
    13. Emmanuel Dhyne & Amil Petrin & Valerie Smeets & Frederic Warzynski, 2014. "Import competition, productivity and multi-product firms," Working Paper Research 268, National Bank of Belgium.
    14. Dumont, Michel & Verschelde, Marijn & Rayp, Glenn & Merlevede, Bruno, 2014. "European competitiveness - A semiparametric stochastic metafrontier analysis at the firm level," Working Paper Series 1701, European Central Bank.
    15. Meinen, Philipp, 2016. "Markup responses to Chinese imports," Discussion Papers 02/2016, Deutsche Bundesbank.
    16. Neil Foster-McGregor & Anders Isaksson & Florian Kaulich, 2016. "Importing, Productivity and Absorptive Capacity in Sub-Saharan African Manufacturing and Services Firms," Open Economies Review, Springer, vol. 27(1), pages 87-117, February.
    17. Virginia Di Nino, 2015. "‘The phenomenal CAT’: firms clawing the goods of others," Questioni di Economia e Finanza (Occasional Papers) 281, Bank of Italy, Economic Research and International Relations Area.
    18. Marco Grazzi & Nanditha Mathew & Daniele Moschella, 2017. "Efficiency, innovation, and imported inputs: determinants of export performance among Indian manufacturing firms," LEM Papers Series 2017/09, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    19. Wassie, Tewodros Ayenew, 2017. "Revisiting the causal effects of exporting on productivity: Does price heterogeneity matter?," MPRA Paper 80576, University Library of Munich, Germany.
    20. Matteo Bugamelli & Francesca Lotti & Monica Amici & Emanuela Ciapanna & Fabrizio Colonna & Francesco D’Amuri & Silvia Giacomelli & Andrea Linarello & Francesco Manaresi & Giuliana Palumbo & Filippo Sc, 2018. "Productivity growth in Italy: a tale of a slow-motion change," Questioni di Economia e Finanza (Occasional Papers) 422, Bank of Italy, Economic Research and International Relations Area.
    21. MORIKAWA Masayuki, 2017. "Impact of Foreign Tourists on Productivity in the Accommodation Industry: A panel data analysis," Discussion papers 17106, Research Institute of Economy, Trade and Industry (RIETI).
    22. A. R. Lamorgese & A. Linarello & Frederic Warzynski, 2014. "Free Trade Agreements and Firm-Product Markups in Chilean Manufacturing," Economics Working Papers 2014-16, Department of Economics and Business Economics, Aarhus University.

    More about this item

    Keywords

    Productivity estimation; Pricing heterogeneity; International trade decisions; Multi-product firms;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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