Estimating productivity with multi-product firms, pricing heterogeneity and the role of international trade

Valérie Smeets () and Frédéric Warzynski
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Valérie Smeets: Department of Economics, Aarhus School of Business, Postal: Institut for Økonomi - Nationaløkonomi, Hermodsvej 22, lokale FH329, 8230 Åbyhøj, Danmark

No 11-13, Working Papers from University of Aarhus, Aarhus School of Business, Department of Economics

Abstract: In this paper, we analyze the relationship between exports, imports and firm productivity. We use a rich product-firm-level dataset providing both revenue and quantities of all products for a large panel of Danish manufacturing firms over the period 1998-2008 and link it to firms’ international trade transactions by product. We use our detailed product level information to compute a firm level deflator and avoid the criticism of biased estimates due to the use of industry level deflator. We find that both importing and exporting behaviours are strongly associated with productivity, but firms involved in both importing and exporting are the most productive. We also find evidence of a self-selection into importing and exporting but no learning effect. Finally, we try to distinguish between cost effect and product quality effect by analyzing the importance of the origin of imports and the destination of exports. We find that both imports from countries with abundant and cheap labor like China and from countries with similar level of development matter, although the mechanism through which productivity is affected is likely to be different. In addition, exporting to more distant OECD economies is more strongly associated to productivity than exporting to neighboring or other EU countries, especially when controlling for the price specific effect.

Keywords: No; keywords (search for similar items in EconPapers)
JEL-codes: A10 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2011-06-01
New Economics Papers: this item is included in nep-bec and nep-eff
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Citations: View citations in EconPapers (3)

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Journal Article: Estimating productivity with multi-product firms, pricing heterogeneity and the role of international trade (2013)
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