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Improved Access to Foreign Markets Raises Plant-Level Productivity... for Some Plants

  • Alla Lileeva

    (York University and Statistics Canada.)

  • Daniel Trefler

    (Rotman School of Management and Department of Economics, University of Toronto, Canadian Institute for Advanced Research, and National Bureau for Economic Research.)

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. (c) 2010 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology..

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Article provided by MIT Press in its journal Quarterly Journal of Economics.

Volume (Year): 125 (2010)
Issue (Month): 3 (August)
Pages: 1051-1099

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Handle: RePEc:tpr:qjecon:v:125:y:2010:i:3:p:1051-1099
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  1. Albert Park & Dean Yang & Xinzheng Shi & Yuan Jiang, 2009. "Exporting and Firm Performance: Chinese Exporters and the Asian Financial Crisis," NBER Working Papers 14632, National Bureau of Economic Research, Inc.
  2. Daniel Trefler, 2004. "The Long and Short of the Canada-U. S. Free Trade Agreement," American Economic Review, American Economic Association, vol. 94(4), pages 870-895, September.
  3. Van Biesebroeck, Johannes, 2005. "Exporting raises productivity in sub-Saharan African manufacturing firms," Journal of International Economics, Elsevier, vol. 67(2), pages 373-391, December.
  4. repec:rus:hseeco:122439 is not listed on IDEAS
  5. John Romalis, 2005. "NAFTA's and CUSFTA's Impact on International Trade," NBER Working Papers 11059, National Bureau of Economic Research, Inc.
  6. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
  7. Michael P. Keane & Susan E. Feinberg, 2007. "ADVANCES IN LOGISTICS AND THE GROWTH OF INTRA-FIRM TRADE: THE CASE OF CANADIAN AFFILIATES OF U.S. MULTINATIONALS, 1984-1995 -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 55(4), pages 571-632, December.
  8. Kevin J. Stiroh, 2001. "Information technology and the U.S. productivity revival: what do the industry data say?," Staff Reports 115, Federal Reserve Bank of New York.
  9. Roberts, Mark J & Tybout, James R, 1997. "The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs," American Economic Review, American Economic Association, vol. 87(4), pages 545-64, September.
  10. Joshua D. Angrist & Guido W. Imbens, 1995. "Identification and Estimation of Local Average Treatment Effects," NBER Technical Working Papers 0118, National Bureau of Economic Research, Inc.
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