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The Role Of Product Level Entry And Exit In Export And Productivity Growth: Evidence From Estonia

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  • Jaan Masso
  • Priit Vahter

Abstract

Recent empirical studies of international trade have stressed that firm level decisions about the number of export products or markets represent an important margin of adjustment in response to globalization and changes in economic conditions. We investigate how decisions about the export product mix are associated with aggregate export dynamics and productivity of firms. For that purpose we use detailed product data and export market level data of the full population of Estonia’s firms. Decomposition analysis of trade flows shows that both the relative importance of firms starting exporting and the role of product level churning (firms adding and dropping products) in total Estonian export growth increases significantly after accession to the EU in 2004. We show that starting to export and adding and dropping export products in the same period is associated with higher firm productivity compared to exporters that keep their export mix unchanged or decrease its breadth. Dropping peripheral products is associated with higher productivity only in the case of firms with a relatively large number of export products.

Suggested Citation

  • Jaan Masso & Priit Vahter, 2012. "The Role Of Product Level Entry And Exit In Export And Productivity Growth: Evidence From Estonia," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 86, Faculty of Economics and Business Administration, University of Tartu (Estonia).
  • Handle: RePEc:mtk:febawb:86
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    References listed on IDEAS

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    1. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2007. "Firms in International Trade," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 105-130, Summer.
    2. Jaan Masso & Priit Vahter, 2011. "Exporting And Productivity: The Effects Of Multi-Market And Multi-Product Export Entry," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 83, Faculty of Economics and Business Administration, University of Tartu (Estonia).
    3. Marc J. Melitz & Gianmarco I. P. Ottaviano, 2008. "Market Size, Trade, and Productivity," Review of Economic Studies, Oxford University Press, vol. 75(1), pages 295-316.
    4. Defever, Fabrice & Heid, Benedikt & Larch, Mario, 2015. "Spatial exporters," Journal of International Economics, Elsevier, vol. 95(1), pages 145-156.
    5. Carsten Eckel & J. Peter Neary, 2010. "Multi-Product Firms and Flexible Manufacturing in the Global Economy," Review of Economic Studies, Oxford University Press, vol. 77(1), pages 188-217.
    6. Antoine Berthou & Lionel Fontagné, 2013. "How do Multiproduct Exporters React to a Change in Trade Costs?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 115(2), pages 326-353, April.
    7. Leonardo Iacovone & BeataS. Javorcik, 2010. "Multi-Product Exporters: Product Churning, Uncertainty and Export Discoveries," Economic Journal, Royal Economic Society, vol. 120(544), pages 481-499, May.
    8. Sergio de Nardis & Carmine Pappalardo, 2009. "Export, Productivity and Product Switching: The Case of Italian Manufacturing Firms," ISAE Working Papers 110, ISTAT - Italian National Institute of Statistics - (Rome, ITALY).
    9. Lucas Navarro, 2012. "Plant level evidence on product mix changes in Chilean manufacturing," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 21(2), pages 165-195, February.
    10. Freund, Caroline & Pierola, Martha Denisse, 2010. "Export entrepreneurs : evidence from Peru," Policy Research Working Paper Series 5407, The World Bank.
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    Citations

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    Cited by:

    1. Andreas Kappeler, 2015. "Estonia: Raising Productivity and Benefitting more from Openness," OECD Economics Department Working Papers 1215, OECD Publishing.
    2. Jaan Masso & Kärt Rõigas & Priit Vahter, 2015. "Foreign market experience, learning by hiring and firm export performance," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 151(4), pages 659-686, November.
    3. Jaan Masso & Priit Vahter, 2011. "Exporting And Productivity: The Effects Of Multi-Market And Multi-Product Export Entry," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 83, Faculty of Economics and Business Administration, University of Tartu (Estonia).
    4. RNuket Kirci Cevik & Sel Dibooglu & Ali M. Kutan, 2016. "Real and Financial Sector Studies in Central and Eastern Europe: A Review," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 66(1), pages 2-31, February.

    More about this item

    Keywords

    exporting; multi-product exporters; extensive margin of trade;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • 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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