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

In this paper, we analyze the relationship between exports, imports and firm productivity. We use a rich product-firm-level dataset providing both revenue and quantities of all products for a large panel of Danish manufacturing firms over the period 1998-2008 and link it to firms’ international trade transactions by product. We use our detailed product level information to compute a firm level deflator and avoid the criticism of biased estimates due to the use of industry level deflator. We find that both importing and exporting behaviours are strongly associated with productivity, but firms involved in both importing and exporting are the most productive. We also find evidence of a self-selection into importing and exporting but no learning effect. Finally, we try to distinguish between cost effect and product quality effect by analyzing the importance of the origin of imports and the destination of exports. We find that both imports from countries with abundant and cheap labor like China and from countries with similar level of development matter, although the mechanism through which productivity is affected is likely to be different. In addition, exporting to more distant OECD economies is more strongly associated to productivity than exporting to neighboring or other EU countries, especially when controlling for the price specific effect.

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File URL: http://www.hha.dk/nat/wper/11-13_vasfwa.pdf
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Paper provided by University of Aarhus, Aarhus School of Business, Department of Economics in its series Working Papers with number 11-13.

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Length: 31 pages
Date of creation: 01 Jun 2011
Date of revision:
Handle: RePEc:hhs:aareco:2011_013
Contact details of provider: Postal:
The Aarhus School of Business, Prismet, Silkeborgvej 2, DK 8000 Aarhus C, Denmark

Phone: +45 89 486396
Fax: +45 8615 5175
Web page: http://www.asb.dk/departments/nat.aspx

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  1. De Locker, Jan & Warzynski, Frederic, 2009. "Markups and Firm-Level Export Status," Working Papers 09-4, University of Aarhus, Aarhus School of Business, Department of Economics.
  2. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2011. "The Empirics of Firm Heterogeneity and International Trade," CEP Discussion Papers dp1084, Centre for Economic Performance, LSE.
  3. Tor Jakob Klette & Zvi Griliches, 1994. "The Inconsistency of Common Scales Estimators when Output Prices are Unobserved and Endogenous," Discussion Papers 127, Statistics Norway, Research Department.
  4. De Loecker, Jan & Goldberg, Pinelopi Koujianou & Khandelwal, Amit & Pavcnik, Nina, 2012. "Prices, Markups and Trade Reform," CEPR Discussion Papers 8900, C.E.P.R. Discussion Papers.
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  9. Wagner, Joachim, 2005. "Exports and Productivity : A survey of the evidence from firm level data," HWWA Discussion Papers 319, Hamburg Institute of International Economics (HWWA).
  10. Marc J. Melitz & Gianmarco I.P. Ottaviano, 2005. "Market Size, Trade, and Productivity," Development Working Papers 201, Centro Studi Luca d'Agliano, University of Milano.
  11. Andrew B. Bernard & J. Bradford Jensen, 1997. "Exceptional Exporter Performance: Cause, Effect, or Both?," NBER Working Papers 6272, National Bureau of Economic Research, Inc.
  12. Sascha O. Becker & Andrea Ichino, 2002. "Estimation of average treatment effects based on propensity scores," Stata Journal, StataCorp LP, vol. 2(4), pages 358-377, November.
  13. Jeremy T. Fox & Valérie Smeets, 2011. "Does Input Quality Drive Measured Differences In Firm Productivity?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(4), pages 961-989, November.
  14. Enghin Atalay, 2014. "Materials Prices And Productivity," Journal of the European Economic Association, European Economic Association, vol. 12(3), pages 575-611, 06.
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  16. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2007. "Firms in International Trade," NBER Working Papers 13054, National Bureau of Economic Research, Inc.
  17. Stephen J Redding & Peter K Schott & Andrew B Bernard, 2007. "Multi-product Firms and Trade Liberalization," 2007 Meeting Papers 44, Society for Economic Dynamics.
  18. George S Olley & Ariel Pakes, 1992. "The Dynamics Of Productivity In The Telecommunications Equipment Industry," Working Papers 92-2, Center for Economic Studies, U.S. Census Bureau.
  19. Davide Castellani & Francesco Serti & Chiara Tomasi, 2010. "Firms in International Trade: Importers' and Exporters' Heterogeneity in Italian Manufacturing Industry," The World Economy, Wiley Blackwell, vol. 33(3), pages 424-457, 03.
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  22. Paulo Bastos & Joana Silva, . "The Quality of a Firm’s Exports: Where you Export to Matters," Discussion Papers 08/18, University of Nottingham, GEP.
  23. repec:pri:cepsud:231deloecker is not listed on IDEAS
  24. Ackerberg, Daniel & Lanier Benkard, C. & Berry, Steven & Pakes, Ariel, 2007. "Econometric Tools for Analyzing Market Outcomes," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 6, chapter 63 Elsevier.
  25. Eriksson, Tor & Smeets, Valerie & Warzynski, Frederic, 2009. "Small Open Economy Firms in International Trade: Evidence from Danish Transactions-Level Data," Working Papers 09-7, University of Aarhus, Aarhus School of Business, Department of Economics.
  26. Joel Rodrigue & Hiroyuki Kasahara, 2004. "Does the Use of Imported Intermediates Increase Productivity? Plant-Level Evidence," Econometric Society 2004 North American Summer Meetings 511, Econometric Society.
  27. Jan De Loecker, 2011. "Product Differentiation, Multiproduct Firms, and Estimating the Impact of Trade Liberalization on Productivity," Econometrica, Econometric Society, vol. 79(5), pages 1407-1451, 09.
  28. Sourafel Girma & David Greenaway & Richard Kneller, 2004. "Does Exporting Increase Productivity? A Microeconometric Analysis of Matched Firms," Review of International Economics, Wiley Blackwell, vol. 12(5), pages 855-866, November.
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