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Export Mode, Trade Costs, and Productivity Sorting

  • Ronald B. Davies

    ()

    (University College Dublin; Institute for International Integration Studies, Trinity College Dublin; CES-Ifo)

  • Tine Jeppesen

    ()

    (University College Dublin)

In this paper we directly test the proposed productivity hierarchy of direct, indirect and non-exporters using firm-level data from 105 developing and transition countries. Using both regression analysis and propensity score matching, we find strong evidence to suggest that direct exporters are on average more productive than both indirect and non-exporters. However, only the results obtained using regression analysis support a similar ranking between indirect and non-exporters. Furthermore, we test the underlying relationship between source-specific fixed trade costs and the average productivity differences between the three firm-types. We find a significant and positive relation between such costs and the average productivity premium of direct exporters only. While other studies have shown that exports by trade intermediaries increase with destination-specific fixed costs, our results suggest that this is also true for source-specific costs, as an increase in the average productivity of direct exporters indicate that a larger share of less productive direct exporters choose to make use of a trade intermediary as export costs rise.

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Paper provided by IIIS in its series The Institute for International Integration Studies Discussion Paper Series with number iiisdp408.

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Length: 61 pages
Date of creation: Sep 2012
Date of revision:
Handle: RePEc:iis:dispap:iiisdp408
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  1. Andrew B. Bernard & Marco Grazzi & Chiara Tomasi, 2010. "Intermediaries in International Trade: direct versus indirect modes of export," Department of Economics Working Papers 1016, Department of Economics, University of Trento, Italia.
  2. Felbermayr, Gabriel J. & Jung, Benjamin, 2011. "Trade intermediation and the organization of exporters," Tübinger Diskussionsbeiträge 331, University of Tübingen, School of Business and Economics.
  3. James E. Rauch & Joel Watson, 2004. "Network Intermediaries in International Trade," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(1), pages 69-93, 03.
  4. Dimitra Petropoulou, 2011. "Information costs, networks and intermediation in international trade," Globalization and Monetary Policy Institute Working Paper 76, Federal Reserve Bank of Dallas.
  5. Caliendo, Marco & Kopeinig, Sabine, 2005. "Some Practical Guidance for the Implementation of Propensity Score Matching," IZA Discussion Papers 1588, Institute for the Study of Labor (IZA).
  6. Fergal McCann, 2013. "Indirect Exporters," Journal of Industry, Competition and Trade, Springer, vol. 13(4), pages 519-535, December.
  7. Demidova, Svetlana & Rodríguez-Clare, Andrés, 2009. "Trade policy under firm-level heterogeneity in a small economy," Journal of International Economics, Elsevier, vol. 78(1), pages 100-112, June.
  8. Shang-Jin Wei & Jaebin Ahn & Amit K. Khandelwal, 2010. "The Role of Intermediaries in Facilitating Trade," Working Papers id:2557, eSocialSciences.
  9. Fergal McCann, 2010. "Indirect exporters," PSE - G-MOND WORKING PAPERS halshs-00963335, HAL.
  10. Catherine A. Pattillo & Taye Mengistae, 2002. "Export Orientation and Productivity in Sub-Saharan Africa," IMF Working Papers 02/89, International Monetary Fund.
  11. Flam, Harry & Helpman, Elhanan, 1987. "Industrial policy under monopolistic competition," Journal of International Economics, Elsevier, vol. 22(1-2), pages 79-102, February.
  12. Jennifer Abel-Koch, 2011. "Firm Size and the Choice of Export Mode," Working Papers 1105, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz, revised 29 Mar 2011.
  13. Gary Biglaiser, 1993. "Middlemen as Experts," RAND Journal of Economics, The RAND Corporation, vol. 24(2), pages 212-223, Summer.
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