THE ROLE OF PRODUCT LEVEL ENTRY AND EXIT IN EXPORT AND PRODUCTIVITY GROWTH: EVIDENCE FROM ESTONIA

Jaan Masso () and Priit Vahter

No 86, University of Tartu - Faculty of Economics and Business Administration Working Paper Series from Faculty of Economics and Business Administration, University of Tartu (Estonia)

Abstract: Recent empirical studies of international trade have stressed that firm level decisions about the number of export products or markets represent an important margin of adjustment in response to globalization and changes in economic conditions. We investigate how decisions about the export product mix are associated with aggregate export dynamics and productivity of firms. For that purpose we use detailed product data and export market level data of the full population of Estonia’s firms. Decomposition analysis of trade flows shows that both the relative importance of firms starting exporting and the role of product level churning (firms adding and dropping products) in total Estonian export growth increases significantly after accession to the EU in 2004. We show that starting to export and adding and dropping export products in the same period is associated with higher firm productivity compared to exporters that keep their export mix unchanged or decrease its breadth. Dropping peripheral products is associated with higher productivity only in the case of firms with a relatively large number of export products.

Keywords: exporting; multi-product exporters; extensive margin of trade (search for similar items in EconPapers)
JEL-codes: D24 F10 F14 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2012
New Economics Papers: this item is included in nep-eff, nep-int and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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