Export Premia Research Articles

Production fragmentation and upgrading opportunities for exporters: An empirical assessment of the case of Brazil

• We investigate how GVCs have affected the performance of exporters in Brazil. • Exporting ‘customized’ intermediate products is associated with supplying in GVCs. • GVC suppliers present higher export premia compared to suppliers of other intermediates. • Only exporters of final goods present evidence of learning-by-exporting. • Production fragmentation does not necessarily facilitate upgrading by suppliers. This paper studies how production fragmentation has affected the performance of Brazilian exporters in the manufacturing sector. We begin by combining existing classifications of internationally traded products to identify four different categories of goods, of which one (‘customized intermediates’) we associate more closely with suppliers connected to fragmented trade. We then proceed to compare the productivity premium of international traders for these different categories. Our results confirm that exporting customized intermediates is associated with a superior performance in comparison to other intermediates; although there is a strong influence of sector specificities. We also investigate the existence of learning-by-exporting effects and, unlike previous evidence for Brazil, we find limited evidence of learning-by-exporting for overall exporters; and no such evidence is found for firms that export exclusively customized intermediates. Instead, we observe that exporting customized products in general – i.e. both final and intermediate goods – relates to continuous and significant ex-post gains in terms of performance; and that these trends are explained by firms that sell final goods. These facts indicate that fragmentation, by promoting trade in customized intermediates, can benefit developing countries and their firms by providing them with opportunities to export a range of industrial goods associated with higher productivity levels, but that performance gains after entry are not necessarily facilitated by this process. Our can findings therefore provide relevant insights regarding the actual benefits and the challenges of promoting GVC participation for developing countries.

The exceptional performance of exporters and labour market outcomes: evidence from Egyptian firms

ABSTRACT This paper examines the manufacturing export market in Egypt after the Arab Spring using a novel firm-level census dataset from 2013. Export is very rare in Egypt. The conventional export premia are very high, except for total factor productivity. Exporters have stark effects on labour market outcomes, including wages, employment, demand for skilled and female workers, wage inequality, and job security. These findings have two important implications: (1) Manufacturing exports might be monopolized by large firms, and (2) promoting exports could improve labour market outcomes, especially for skilled and female workers.

WHAT'S BEHIND THE FIGURES? QUANTIFYING THE CROSS‐COUNTRY EXPORTER PRODUCTIVITY GAP

We present a simple framework that allows us to examine the cross‐country exporter productivity gap without accessing confidential firm‐level data. This gap depends on the three readily available statistics: the productivity gap between two countries; the export participation rates; and export premia. This gap holds irrespective of the distribution underlying firm productivity and irrespective of the presence of fixed costs. Under specific conditions, allocative efficiency may affect the exporter productivity gap. The empirical analysis globally validates this exercise. (JEL F1, D24)

Productivity and wage premiums: Evidence from Vietnamese ordinary and processing exporters

We propose some new stylized facts on Vietnamese exporters that emphasize firm heterogeneity in trade regimes and firm ownership. We show first that the distribution of firms' export intensities is U-shaped with more than half of Vietnamese exporters exporting more than 50% of their output. This contrasts with the export patterns in industrialized countries but is similar to the export intensity distribution for other emerging economies with strong participation in global value chains. Second, we show that export premia, evaluated in terms of both productivity and wage indexes, are positive only for Vietnamese exporters involved primarily in ordinary trade, and that processing exporters exhibit lower productivity indexes and pay lower wages than their non-exporting counterparts. This pattern is more pronounced among the group of foreign-owned firms in Vietnam compared to the group of domestic firms and is in line with previous findings for China.

Explaining the size differences of exporter premia: theory and evidence

Two decades of research have established pronounced exporter productivity premia (EPP) and exporter size premia (ESP). Yet, we do not know why such exporter premia differ so widely in magnitude across countries or sectors? We take this question to the theory and to the data. We derive the sectoral EPP and ESP in a standard heterogeneous firms trade model and apply the insights from the model to guide our empirical investigation of detailed Danish firm-level data. We show that a significant share of the observed variation in EPP and ESP across sectors can be accounted for by sector differences in the underlying variation in productivity dispersion, variable trade costs, the ratio of fixed export costs to fixed costs of production, and the elasticity of demand.

Export and FDI premia among services firms in the developing world

There is extensive econometric evidence showing that goods exporters are larger, more productive, and pay higher wages than nonexporters (‘export premia’). However, evidence for firms in the services sector is much more limited. This article uses firm-level data from a range of developing countries to show that export premia also exist for services firms in the developing world. Internationalized services firms display similar characteristics to internationalized manufacturers: they are larger, employ more workers, pay higher wages, invest more heavily and grow faster.

Heterogeneous Firms or Heterogeneous Workers? Implications for Exporter Premiums and the Gains from Trade

We investigate to what extent worker heterogeneity explains the well-known wage and productivity exporter premia, employing a matched employer-employee data set for Norwegian manufacturing. The wage premium falls by roughly 50 percent after controlling for observed and unobserved worker characteristics, while the TFP premium falls by 25-40 percent, suggesting that sorting explains up to half of these premia. Recent trade models (e.g. Melitz, 2003) emphasize the role of within-industry reallocation of labor in response to various shocks to the economy. An implication of our work is that aggregate productivity gains due to reallocation may be overstated if not controlling for sorting between …rms and workers.

Product and process productivity: Implications for quality choice and conditional exporter premia

We develop a model of international trade with two dimensions of firm heterogeneity. The first dimension is “process productivity”, which is how we denote the standard concept of productivity as modeled in the literature. The second one is “product productivity”, defined as firms' ability to develop high-quality products spending small fixed outlays. The distinction between these two sources of productivity, together with the assumption that iceberg trade costs decrease with quality, delivers various conditional exporter premia as theoretical predictions. Conditional on size, exporters sell higher quality products, charge higher prices, pay higher input prices and higher wages, and use capital more intensively. Some of these predictions had already been documented in the empirical literature but lacked a theoretical framework for properly interpreting them. We conduct systematic tests of these predictions using manufacturing establishment data for India, the U.S., Chile, and Colombia, and find strong support for the model.

An Agent Based Model of Monopolistic Competition in International Trade with Emerging Firm Heterogeneity

Export firms have better performance than firms that do not export, the so-called exporter premia: exporters are larger, they are relatively more capital and skill intensive, exporters have higher productivity (Bernard et al. 2007a; Bernard et al. 2005). The better performance of exporters may be the result of a self-selection effect: only the most competitive firms are able to enter foreign markets (ex-ante self-selection). On the other hand, exporting may improve firm performance (ex-post effect). Differences between exporters and non-exporters may have a significant impact on aggregate welfare and growth; in particular, disentangling the importance of the ex-ante effect from the ex-post effect may be useful for designing public policies (Bernard & Jensen 1999). The economic approach based on the Melitz (2003) model analyzes the exporter premia using monopolistic competition markets with firm heterogeneity in terms of a given distribution of firm productivity. This paper presents an agent based simulation of a monopolistic competition market in which firm heterogeneity is an emerging pattern of firms' choices and interactions, conceiving productivity growth as the results of firms' individual innovative efforts. The model is able to replicate the better performance of exporters, stressing the importance of decision-making processes and learning capabilities of firms in determining both the ex-ante and the ex-post effects.

Differences in Export Behavior of Services and Manufacturing Firms in Slovenia

We provide new comprehensive evidence on similarities and differences in export Behavior of Slovenian manufacturing and services firms by using detailed firm-level panel data for Slovenia. Main findings show that export Behavior in these two types of firms is similar and in line with the big picture that is by now familiar from the literature. Slovenian exporting services firms are more productive than non-exporting firms when observed and unobserved heterogeneity are controlled for. Export premia of services firms is even larger than for exporting manufacturing firms. Similarly, pre-entry premia over non-exporters is even larger than for manufacturing firms. We find some evidence of significant learning by exporting effects for services firms, but only when using the Levinsohn and Petrin measure of total factor productivity.

Differences in export behavior of services and manufacturing firms in Slovenia

We provide new comprehensive evidence on similarities and differences in export Behavior of Slovenian manufacturing and services firms by using detailed firm-level panel data for Slovenia. Main findings show that export Behavior in these two types of firms is similar and in line with the big picture that is by now familiar from the literature. Slovenian exporting services firms are more productive than non-exporting firms when observed and unobserved heterogeneity are controlled for. Export premia of services firms is even larger than for exporting manufacturing firms. Similarly, pre-entry premia over non-exporters is even larger than for manufacturing firms. We find some evidence of significant learning-by-exporting effects for services firms, but only when using the Levinsohn and Petrin measure of total factor productivity.

Austrian exporters: unique or alike? New insights and missing puzzle pieces

In this paper we provide detailed evidence on the performance of exporters compared to non-exporters in Austrian manufacturing industries based on firm-level data. The centrepiece of the study is the issue of the export premium, i.e. the size and productivity advantages of exporting firms compared to their purely domestic peers. We present evidence for the existence of sales, labour productivity and wage premia. These results are largely in line with the results found for other European countries. Furthermore we document the existence of large differences in these premia across industries and provide explanations for this finding. Our results are robust with regards to including additional firm control variables such as employment and R&D-related variables though the magnitudes of the export premia become much smaller. We also propose a new interpretation of the export premium estimation with firm fixed effects which we interpret as a result on export switchers. Finally, we employ a probit model to document the importance of sunk export costs for the decision to export.

Export Premia and Subcontracting Discount: Passive Strategies and Performance in Domestic and Foreign Markets

AbstractThis paper contributes to the literature on firms’ productivity and exporting decisions by analysing the role played by organisational choice aspects. Rather than setting up a vertically integrated structure, manufacturers may act as subcontractors in both domestic and foreign markets, and produce to satisfy the requirements of other firms. The predictions that the most productive firms self‐select into exporting, whereas the least productive ones work as subcontractors serving the domestic market only, are tested on a sample of Italian firms observed during the 1998–2003 period. The results of our estimates highlight a ranking of firms consistent with a priori expectations, and provide a clear indication that passive exporters (i.e. those using subcontracting in foreign markets) display lower total factor productivity (TFP) values when compared with direct exporters. Moreover, only the latter category exhibits higher pre‐entry productivity levels and growth rates as well as higher post‐entry TFP growth rates. Such findings are consistent with both the self‐selection hypothesis and the learning‐by‐exporting explanation.

Exporter performance in the German business services sector

A wide range of empirical studies has analysed exporter performance, especially the relationship between exports and productivity in the manufacturing sector. By contrast, a detailed investigation of the services sector has remained largely neglected. To close this gap this paper focuses on the relationship between exports and several performance characteristics in the German business services sector – average wage, productivity, size, and turnover profitability – in order to determine whether export premia and self-selection into export markets exist in the business services sector. To ensure the comparability of the results with those from the manufacturing sector, empirical models used to analyse the manufacturing sector are transferred to investigate the business services.

Who Trades with Whom? Exploring the Links between Firms' International Activities, Skills, and Wages

Using firm-level data on the Italian manufacturing industry, we examine how trade activities are related to workforce composition and wages. We contribute to empirical research on these issues in three ways. First, we provide new evidence that is consistent with multi-attribute models on firm heterogeneity and trade. We show that even after controlling for various company characteristics, including size and capital intensity, exporters still pay higher wages and employ more skilled workers than nonexporters. Second, we consider engagement in international transactions, either by means of exports, imports, or a combination of the two. We show that failing to control for importing activities may bias upward export premia. Third, we look at how the wage and the employment structures of trading firms change with the country of destination and origin of trade flows. We find that wage and skill premia are influenced by the characteristics of partner countries.

Exports and Productivity Comparable Evidence for 14 Countries

We use comparable micro level panel data for 14 countries and a set of identically specified empirical models to investigate the relationship between exports and productivity. Our overall results are in line with the big picture that is by now familiar from the literature: Exporters are more productive than non-exporters when observed and unobserved heterogeneity are controlled for, and these exporter productivity premia tend to increase with the share of exports in total sales; there is strong evidence in favour of self-selection of more productive firms into export markets, but nearly no evidence in favour of the learning-by-exporting hypothesis. We document that the exporter premia differ considerably across countries in identically specified empirical models. In a meta-analysis of our results we find that countries that are more open and have more effective government report higher productivity premia. However, the level of development per se does not appear to be an explanation for the observed cross-country differences.

Export Premia and Sub-Contracting Discount: Passive Strategies and Performance in Domestic Foreign Markets

This paper contributes to the literature on firms' productivity and exporting decisions by analysing the role played by organizational choice aspects. Rather than setting up a vertically integrated structure, manufacturers may act as subcontractors in both domestic and foreign markets, and produce to satisfy the requirements of other firms. A very simple model is presented where the most productive firms self-select into exporting, while the least productive ones work as sub-contractors serving the domestic market only. These predictions are tested using a sample of Italian firms observed in the 1998-2003 period. The results of our estimates highlight a ranking of firms consistent with a priori expectations, and provide a clear indication that passive exporters (i.e. using sub-contracting in foreign markets) display lower TFP values as compared to direct exporters. Moreover, only the latter category exhibits higher pre-entry productivity levels and growth rates as well as higher post-entry TFP growth rates. Such findings are consistent with both the self-selection hypothesis and the learning by exporting explanation.

Understanding Cross-Country Differences in Exporter Premia: Comparable Evidence for 14 Countries

We use comparable micro level panel data for 14 countries and a set of identically specified empirical models to investigate the relationship between exports and productivity. Our overall results are in line with the big picture that is by now familiar from the literature: exporters are more productive than non-exporters when observed and unobserved heterogeneity is controlled for, and these exporter productivity premia tend to increase with the share of exports in total sales; there is evidence in favour of self-selection of more productive firms into export markets, but nearly no evidence in favour of the learning-by-exporting hypothesis. We document that the exporter premia differ considerably across countries in identically specified empirical models. In a meta-analysis of our results we find, consistent with theoretical predictions, that productivity premia are larger in countries with lower export participation rates, with more restrictive trade policies, lower per capita GDP, less effective government and worse regulatory quality, and in countries exporting to relatively more distant markets.

Exports and Productivity - Comparable Evidence for 14 Countries by The International Study Group on Exports and Productivity

We use comparable micro level panel data for 14 countries and a set of identically specified empirical models to investigate the relationship between exports and productivity. Our overall results are in line with the big picture that is by now familiar from the literature: Exporters are more productive than non-exporters when observed and unobserved heterogeneity are controlled for, and these exporter productivity premia tend to increase with the share of exports in total sales; there is strong evidence in favor of self-selection of more productive firms into export markets, but nearly no evidence in favor of the learning-by-exporting hypothesis. We document that the exporter premia differ considerably across countries in identically specified empirical models. In a meta-analysis of our results we find that countries that are more open and have more effective government report higher productivity premia. However, the level of development per se does not appear to be an explanation for the observed cross-country differences.

Export Premia and Sub-Contracting Discount: Passive Strategies and Performance in Domestic and Foreign Markets

This paper contributes to the literature on firms’ productivity and exporting decisions by analysing the role played by organizational choice aspects. Rather than setting up a vertically integrated structure, manufacturers may act as subcontractors in both domestic and foreign markets, and produce to satisfy the requirements of other firms. A very simple model is presented where the most productive firms self-select into exporting, while the least productive ones work as sub-contractors serving the domestic market only. These predictions are tested using a sample of Italian firms observed in the 1998-2003 period. The results of our estimates highlight a ranking of firms consistent with a priori expectations, and provide a clear indication that passive exporters (i.e. using sub-contracting in foreign markets)display lower TFP values as compared to direct exporters. Moreover, only the latter category exhibits higher pre-entry productivity levels and growth rates as well as higher post-entry TFP growth rates. Such findings are consistent with both the self-selection hypothesis and the learning by exporting explanation.