Productivity dispersion and its determinants: the role of import penetration

The new heterogeneous firm models in international economics suggest a negative impact of trade openness on the within-sector disparities, due to a restructuring process leading to a resources reallocation toward high efficient firms and the exit of less productive ones. I test this hypothesis for the Italian manufacturing sectors making use of both static and dynamic panel data models. Especially, I investigate the existence of heterogeneous effects in terms of origin of imports and I take into account of the regional heterogeneity computing the productivity dispersion indicator within each sector and regional macro-area. The analysis is implemented within a comprehensive framework controlling for other potential determinants, such as the technological factors and the domestic competition. My findings show that the competitive pressure from low income countries reduces the productivity heterogeneity across firms, while an opposing impact is detected for the exposure to trade with high income economies, and I argue that two different mechanisms are at work behind these effects.