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Trade and Productivity: Self-Selection or Learning-by-Exporting in India

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  • Jamal Ibrahim Haidar

Abstract

Recent literature tried to explain the Indian growth miracle in different ways, ranging from trade liberalization to industrial reforms. Using data on Indian manufacturing firms, this paper analyzes the relationship between firm's productivity and export market participation during 1991?2004. While it provides evidence of the self-selection hypothesis by showing that more productive firms become exporters, the results do not show that entry into export markets enhances productivity. The paper examines the explanation of self selection hypothesis for total factor productivity differences across 33,510 exporting and non-exporting firms. It uses propensity score matching to test the learning-by-exporting hypothesis. In line with the prediction of recent heterogeneous firm models of international trade, the main finding of the paper is: more productive firms become exporters but it is not the case that learning by exporting is a channel fuelling growth in Indian manufacturing.

Suggested Citation

  • Jamal Ibrahim Haidar, 2012. "Trade and Productivity: Self-Selection or Learning-by-Exporting in India," Working Paper 309961, Harvard University OpenScholar.
    • Handle: RePEc:qsh:wpaper:309961
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    File URL: http://scholar.harvard.edu/haidar/node/309961
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    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • F10 - International Economics - - Trade - - - General
    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • L6 - Industrial Organization - - Industry Studies: Manufacturing

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