Self-selection, Export Market Heterogeneity and Productivity Improvements: Firm Level Evidence from Slovenia

Joze Damijan, Sašo Polanec and Janez Prasnikar

LICOS Discussion Papers from LICOS - Centre for Institutions and Economic Performance, KU Leuven

Abstract: This paper adds a new dimension to the recent literature on relationship beween firm's heterogeneity in terms of productivity and its decision to exports and/or invest in foreign affiliate, namely the heterogeneity of foreign markets. Exploiting a rich and complete dataset for Slovenian exporting firms in the period 1994 - 2002, we gain several interesting insights. First, we demonstrate the importance of fixed entry costs in foreign markets causing that the number of foreign markets served by individual firm increases with firm's productivity level. We show that firms enter additional export markets only gradually - on average one market in two years. Second, we demonstrate that, on average, exporting firms are not always more productive than firms supplying only domestic market. Also, we confirm a conjecture that higher productivity level is required for firms starting to export to advanced countries as opposed to starting to export to developing countries. Finally, we observe that firms can gain significant productivity improvements when serving foreign markets. Significant productivity improvements occur only when serving advanced, high-wage foreign markets. In a small open country, exporting per se does not warranty such effects.

Keywords: Exports; Productivity; Firm Heterogeneity; Export Market Heterogeneity (search for similar items in EconPapers)
JEL-codes: D24 F14 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2004
New Economics Papers: this item is included in nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (89)

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Persistent link: https://EconPapers.repec.org/RePEc:lic:licosd:14804

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