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Improved Access to Foreign Markets Raises Plant-level Productivity…For Some Plants

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  • Alla Lileeva
  • Daniel Trefler

Abstract

Market size matters for innovation and hence for productivity. Improved access to foreign markets will thus encourage firms to simultaneously export and invest in raising productivity. We examine this insight using the responses of Canadian plants to the elimination of U.S. tariffs. Unique "plant-specific" tariff cuts serve as an instrument for changes in exporting. We find that Canadian plants that were induced by the tariff cuts to start exporting or to export more (a) increased their labor productivity, (b) engaged in more product innovation, and (c) had higher adoption rates for advanced manufacturing technologies. Further, these responses were heterogeneous.

Suggested Citation

  • Alla Lileeva & Daniel Trefler, 2010. "Improved Access to Foreign Markets Raises Plant-level Productivity…For Some Plants," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(3), pages 1051-1099.
    • Handle: RePEc:oup:qjecon:v:125:y:2010:i:3:p:1051-1099.
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    File URL: http://hdl.handle.net/10.1162/qjec.2010.125.3.1051
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