Trade shocks, product mix adjustment and productivity growth in Italian manufacturing

Maria Gabriela Ladu, Andrea Linarello and Filippo Oropallo ()

The World Economy, 2020, vol. 43, issue 5, 1434-1451

Abstract: In this paper, we use firm‐level data on the universe of Italian manufacturing multi‐product exporters to test whether demand shocks in export markets lead multi‐product exporters to increase their productivity. The main mechanism behind the documented productivity gains is the reallocation of resources across products within firms (American Economic Review, 104, 2014 and 495; National Bureau of Economic Research Working Paper Series No. 22433, 2016). Intuitively, the increased demand stemming from foreign markets will induce firms to adjust their product mix by moving inputs from low to high productive/profitable uses. We find that these productivity gains are significant and can explain between 1/10 and 1/2 of aggregate productivity growth in the manufacturing sector.

Date: 2020
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https://doi.org/10.1111/twec.12927

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Working Paper: Trade shocks, product mix adjustment and productivity growth in Italian manufacturing (2019)
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