Trade integration, economic geography and productivity: The Indo-Sri Lanka FTA
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.
|Date of creation:||Sep 2011|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.ersa.org
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bernard, A., 1997.
"Exceptional Exporter Performance: Cause, Effect, or Both?,"
97-21, Massachusetts Institute of Technology (MIT), Department of Economics.
- 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.
- Andrew B. Bernard & J. Bradford Jensen, 1997. "Exceptional Exporter Performance: Cause, Effect, or Both?," NBER Working Papers 6272, National Bureau of Economic Research, Inc.
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)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 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.