IDEAS home Printed from
   My bibliography  Save this paper

Trade integration, economic geography and productivity: The Indo-Sri Lanka FTA


  • Megha Mukim



Although there is much empirical evidence to show that good firms become exporters, the literature is less lucid regarding the benefits of exporting. This paper disentangles the direction of the causality to show that exporting improves firm performance. It uses Indian plant-level data (over 1995-2008) for 330 firms across six product categories, which experienced sharp increases in exports to Sri Lanka, which then became an important destination market for these products. I generate measures of total factor productivity by estimating production functions using plant-level physical output data. To deal with the problem of self-selection bias, I use instrumental variables that predict export status but are uncorrelated with unobserved productivity. As a robustness check, I model the exporting decision explicitly and jointly estimate it with the production function. I follow Levinsohn and Petrin (2003) and use intermediate inputs to deal with the simultaneity problem. I also conduct panel-data regressions at the industry (4-digit NIC) level to estimate the relationship between productivity and measures of international exposure, such as export shares. I also study how firm performance differs with regards to firm location, and model the effects of economic geography variables such as market access and agglomeration. This paper contributes to the empirical literature by measuring the effects of learning-by-exporting, and makes the case that these effects are more significant for firms that enjoy the advantages of geography.

Suggested Citation

  • Megha Mukim, 2011. "Trade integration, economic geography and productivity: The Indo-Sri Lanka FTA," ERSA conference papers ersa10p176, European Regional Science Association.
  • Handle: RePEc:wiw:wiwrsa:ersa10p176

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Bernard, Andrew B. & Bradford Jensen, J., 1999. "Exceptional exporter performance: cause, effect, or both?," Journal of International Economics, Elsevier, vol. 47(1), pages 1-25, February.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Amirul Islam & Ruhul Salim & Harry Bloch, 2016. "Does Regional Integration Affect Efficiency And Productivity Growth? Empirical Evidence From South Asia," Review of Urban & Regional Development Studies, Wiley Blackwell, vol. 28(2), pages 107-122, July.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wiw:wiwrsa:ersa10p176. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gunther Maier). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.