EXPORT‐MARKET DYNAMICS AND THE PROBABILITY OF FIRM CLOSURE: EVIDENCE FOR THE UNITED KINGDOM

This study presents the first empirical analysis of the determinants of firm closure in the United Kingdom with an emphasis on the role of export‐market dynamics, using panel data for a nationally representative group of firms operating in all‐market‐based sectors during 1997–2003. Our findings show that the probability of closure is (cet. par.) significantly lower for exporters, particularly those experiencing export‐market entry and exit. Having controlled for other attributes associated with productivity (such as size and export status), the following factors are found to increase the firm's survival prospects: higher capital intensity and TFP, foreign ownership, young age, displacement effects (through relatively high rates of entry of firms in each industry), and belonging to certain industries. Interestingly, increased import penetration (a proxy for lower trade costs) leads to a lower hazard rate for exporting entrants and continuous exporters, while inducing a higher hazard rate for domestic producers or those that quit exporting.     

Productivity Performance of Export Market Entry and Exit: Evidence from Indian Firms

This paper contributes to the literature on exporting and firm productivity, focusing on export entry (efficiency), learning (post‐entry growth) and exit (inefficiency) by Indian firms. Drawing on 7000 firms during 1989–2009, our main objective is to examine the effect of exporting on firm productivity, correcting for selection bias using propensity‐score matching, which allows a “like‐for‐like” comparison between new exporters and nonexporters. Robust to different matching estimators, we find evidence of learning‐by‐exporting that new exporters acquire rapid productivity growth after entry, relative to nonexporters. We also find that (1) exporters are more productive than nonexporters; (2) productive firms tend to self‐select in entering the exporting market, and (3) least productive exporters are found to exit the export market as they experience adverse productivity effect prior to the year of exit. Our robust result on learning‐by‐exporting suggests that entering export market does appear to be a channel explaining the Indian recent growth miracle.     

企业出口与生产率的关系——基于中国工业企业数据的实证研究

采用1998—2007年中国工业企业数据,对出口与生产率的关系进行了再探讨,具体研究了出口企业是否具有更高的生产率、企业在做出口决策的过程中是否存在自我选择机制以及出口行为本身是否能促进企业生产率的增长。研究结果显示:当用TFP衡量生产率时,企业出口决策中存在自我选择机制,因此出口企业的生产率相对较高——这与异质企业贸易模型的预期结果一致;当用劳动生产率(人均附加值)衡量企业生产率时,则"生产率悖论"存在,即出口者的生产率反而较低;当企业刚进入出口市场时,其生产率会经历短期的快速增长,但从长期来看,出口对企业生产率增长的作用在整体上是负向的。     

Intra‐firm trade,exporting, importing,and firm performance

Abstract This paper examines firm heterogeneity in terms of size, wages, capital intensity, and productivity between domestic and foreign‐owned firms that engage in intra‐firm trade, firms that export and import, firms that import only, and firms that export only. As previously documented, heterogeneity between different groups of trading firms is substantial. Taking into account intra‐firm trade in addition to exporting and importing yields new insights into the productivity advantage previously established for exporting firms. The results presented here show that this premium accrues only to exporters that also import and to exporters that also engage in intra‐firm trade, but not to firms that export only. Using simultaneous quantile regressions, the paper illustrates that heterogeneity within different groups of trading firm is equally large. Some of this within‐group heterogeneity can be attributed to differences in trading partners.     

Not so different from non-traders

This paper uses a unique, comparable firm-level dataset covering more than 80 developing middle-income economies to provide a novel set of stylized facts on firms engaging in international trade, focusing on the Middle East and North Africa (MENA) region. We show that firms in MENA are more likely to export and/or import than their counterparts elsewhere. However, we only find the expected positive and significant productivity premia for exporters outside of MENA. While MENA's larger exporters are indeed more productive than non-exporters, a large share of exporters – the comparatively low-volume ones – are not. We also confirm positive and significant size and productivity premia for manufacturers that import only, with productivity premia in MENA at least double of those in middle-income economies elsewhere. In contrast, we find no size or productivity premia for MENA's manufacturers that export, but do not import. These patterns are consistent with substantial distortions in the relative fixed and variable costs of trading, likely a reflection of selectively applied policies.     

International trade and firm innovation: patterns and evidence from the Chinese Employer-Employee Survey data

ABSTRACT

How international trade fosters firm innovation is crucial in understanding how economic integration boosts productivity growth. This study uses the Chinese Employer-Employee Survey data set, which contains detailed, firm-level information on exports, imports, and innovation. The study documents several stylized facts characterizing the interaction between international trade and innovation among Chinese firms. The main findings are that exporters and importers are exceptional in production and innovation; exporters are more inclined to import material and machinery inputs; domestic and private firms do not seem to be more innovative than their counterparts.

Abbreviations: CEES: Chinese Employer-Employee Survey; FIE: Foreign investment enterprise; NBS: National Bureau of Statistics of China; SOE: State-owned enterprise     

Regional variations in exporters’ productivity premium: Theory and evidence

The international trade literature confirms that the average productivity of exporters is higher than that of nonexporters, while economic geography studies establish that urban firms tend to be more productive than rural ones. By introducing region‐specific transportation costs in a Melitz‐type heterogeneous‐firm trade model, the theory predicts that the minimum threshold productivity level for export is higher but that for survival by serving the local market is lower in the periphery region than in the core. Using Japanese plant‐level panel data, we find evidence supporting the theoretical prediction that exporters in the peripheral regions, especially those distant from the core, have large productivity premiums.     

Trade and productivity: Self-selection or learning-by-exporting in India

Recent literature tried to explain the Indian growth miracle in different ways, ranging from trade liberalization to industrial reforms. Using data on Indian manufacturing firms, this paper analyzes the relationship between firm's productivity and export market participation during 1991–2004. While it provides evidence of the self-selection hypothesis by showing that more productive firms become exporters, the results do not show that entry into export markets enhances productivity. The paper examines the explanation of self selection hypothesis for total factor productivity differences across 33,510 exporting and non-exporting firms. It uses propensity score matching to test the learning-by-exporting hypothesis. In line with the prediction of recent heterogeneous firm models of international trade, the main finding of the paper is: more productive firms become exporters but it is not the case that learning by exporting is a channel fuelling growth in Indian manufacturing.     

Market structures in small open economies: Evidence from Denmark

This paper provides some stylized facts about market structure in Denmark, a country exhibiting high rates of exports and imports as is common in small developed economies. Utilizing disaggregated data at the firm-product level for manufacturing industries, we highlight the widespread presence of industries that are neither purely oligopolistic or monopolistically competitive; rather, they contain a few domestic leaders with numerous firms having insignificant domestic market shares. We also document that, relative to the latter type of firms, leaders have greater labor productivity, are more capital intensive, and pay higher wages; additionally, they are more likely to export and import, although they exhibit a greater domestic intensity relative to exporters with negligible domestic market shares. Finally, through a model of leaders and followers, we investigate how leaders can benefit from acting strategically against small firms and quantify its potential impact on industry outcomes through a numerical exercise.     

Openness, managerial incentives, and heterogeneous firms

This paper examines the effects of trade openness on managerial incentives and firm-level productivity by incorporating the principal-agent mechanism into the heterogeneous firm trade framework inter alia Melitz (Econometrica 71:1695?C1725, 2003). We show that opening up to trade generally leads to a steeper optimal managerial incentive scheme (and hence, higher firm productivity) via a new mechanism by which selection of heterogeneous firms into the export market plays a key role. This is because trade openness unambiguously increases the variation of firm profits by reallocating profits towards ex post low-cost exporters, leading to a higher stake of the market game faced by the principals. Interestingly, it is further shown that, whilst falling variable trade costs unambiguously increase managerial incentives, a reduction in fixed trade costs could possibly lead to weaker incentives and thus generate productivity losses due to an adverse inter-firm reallocation effect. Hence, the model establishes a causal link between the Melitz-type reallocation effect and the within-firm productivity changes, both of which have been identified as important sources of aggregate productivity gains from trade by recent empirical studies.     

Fixed export cost heterogeneity, trade and welfare

Recent literature on the workhorse model of intra-industry trade has explored heterogeneous cost structures at the firm level. These approaches have proven to add realism and predictive power. This paper presents a new and simple heterogeneous-firms specification. We develop a symmetric two-country intra-industry trade model where firms are of two different marginal cost types and where fixed export costs are heterogeneous across firms. This model traces many of the stylized facts of international trade. However, we find that with heterogeneous fixed export costs there exists a positive bilateral tariff that maximizes national and world welfare.     

Trade Liberalization,Firm Selection,and Variety Growth

Recent empirical findings indicate that when trade is liberalized both firm selection takes place and product variety increases. Each of these two stylized facts has its own seminal theory. But how can they arise together? This paper presents a model of heterogeneous, multi‐variety firms that provides an intuitive explanation. When trade is liberalized efficient foreign exporters enter and push out the least efficient domestic firms. Fewer firms remain in total. But exporters endogenously offer more variety than domestic firms. The entry of variety‐rich foreign firms unambiguously dominates the decrease in the number of firms. Thus, total variety increases.     

Skill‐biased heterogeneous firms,trade liberalization and the skill premium

We propose a theory that rising globalization and rising wage inequality are related because trade liberalization raises the demand facing highly competitive skill‐intensive firms. In our model, only the lowest‐cost firms participate in the global economy exactly along the lines of Melitz ( 2003 ). In addition to differing in their productivity, firms differ in their skill intensity. We model skill‐biased technology as a correlation between skill intensity and technological acumen, and we estimate this correlation to be large using firm‐level data from Chile in 1995. A fall in trade costs leads to both greater trade volumes and an increase in the relative demand for skill, as the lowest‐cost/most‐skilled firms expand to serve the export market while less skill‐intensive non‐exporters retrench in the face of increased import competition. This mechanism works regardless of factor endowment differences, so we provide an explanation for why globalization and wage inequality move together in both skill‐abundant and skill‐scarce countries. In our model countries are net exporters of the services of their abundant factor, but there are no Stolper‐Samuelson effects because import competition affects all domestic firms equally.     

Learning How To Export

In this paper, we present a standard quality ladders endogenous growth model with one significant new assumption: it takes time for firms to learn how to export. It is known that the welfare gains from trade liberalization implied by a large class of models like the Armington gravity model, the Krugman model, and the Melitz model are small. Our quality ladders model is consistent with a number of firm‐level stylized facts from the heterogeneous firms trade literature and is, in addition, capable of generating very large welfare gains from trade liberalization.     

Financial factors and the margins of trade: Evidence from cross-country firm-level data

Using a large cross-country, firm-level database containing 5000 firms in 9 developing and emerging economies, we study how financial factors affect both firms' export decisions and the amount exported by firms. First, our results highlight the importance of the impact of firms' access to finance on their entry decision into the export market. However, better financial health neither increases the probability of remaining an exporter once the firm has entered, nor the size of exports. Second, we find that financial constraints create a disconnection between firms' productivity and their export status: productivity is only a significant determinant of the export decision if the firm has a sufficient access to external finance. Finally, an increase in a country's financial development dampens this disconnection, thus acting both on the number of exporters and on the exporters' selection process. These results contribute to the literature documenting the role of fixed costs and of the extensive margin of trade in total trade adjustment, and provide micro-level evidence of the positive impact of financial development on trade found by previous literature.     

A Simple Theory of Trade,Finance and Firm Dynamics

A stylized monopolistic competition model of international trade is proposed where firms differ with respect to the expected economic lifetime of their innovations. Upon entry, they receive a commonly observed signal which is updated over time. Jointly with partial irreversibility of investment, this generates heterogeneity in effective discount rates and, thus, in the cost of finance. In line with evidence, the model predicts a negative correlation between firms' financing costs and their age. Over a firm's life cycle, per period net profits and the export participation probability grow. Exporters are less likely to exit than purely domestic firms. Belief updating entails excessive financing of incumbents relative to entrants and too much exporting. Asymptotically, trade liberalization reduces overall general equilibrium exit rates, but it does not necessarily increase welfare. With multiple asymmetric export markets, firms gradually expand their market coverage and total sales. A confidence crisis modeled by belief reversion causes an over‐proportional decrease in exports, thereby offering a novel interpretation of the trade slump in 2008/09.     

INTERNATIONAL WELFARE AND EMPLOYMENT LINKAGES ARISING FROM MINIMUM WAGES*

We formulate a two‐country model with monopolistic competition and heterogeneous firms to reconsider labor market linkages in open economies. Labor market imperfections arise by virtue of country‐specific real minimum wages. Abstracting from selection of just the best firms into export status, standard effects on marginal and average firm productivity are reversed in our model, yet there are significant gains from trade arising from employment expansion. In addition, we show that with firm heterogeneity an increase in one country’s minimum wage triggers firm exit in both countries and thus harms workers at home and abroad.     

Trade and firm heterogeneity in a Schumpeterian model of growth

The present paper explores the effect of trade liberalization on the level of productivity as well as the rate of productivity growth in an R&D-based model with heterogeneous firms. We introduce new and plausible features that are absent in existing studies. First, technical progress takes the form of continual quality improvement of products over time. Second, firm entry and exit are endogenously determined due to creative destruction of products. In this framework, we demonstrate that a lower transport cost or export sunk cost unambiguously reallocates resources to R&D and top-quality product industries from low-quality good industries. This means that trade liberalization increases the rate of technical progress as well as the level of manufacturing productivity. These results are found to be robust in an extended model with population growth without scale effects.     

Exporters in cross‐section: Direct versus intermediated trade

How do producers that export their goods directly differ from those that export through trade intermediaries? We take a standard model of trade with heterogeneous firms and add heterogeneity in quality to the usual heterogeneity in productivity. Modeling trade intermediaries as increasing marginal costs but decreasing fixed costs of exporting, we find that only firms with the highest quality‐adjusted productivity levels choose to export directly. Under certain parameter restrictions, the model shows that direct exporters tend to be larger and charge higher prices for their goods. In contrast to the literature, using Chinese customs data, we confirm that direct exporters do charge higher prices for their goods.     

企业出口之动态效应研究-来自中国制造业企业的经验:2001-2007

本文对中国企业的出口选择及其学习效应进行研究。结果表明:中国同样存在优质企业做出口的现象;出口会迅速实现企业的规模扩张;出口企业通过出口学习会给企业带来生产率的短期提高,而后出现动态衰减。我们的研究启示是:依附低端制造和外生出口贸易中介的中国企业,通过进入国际市场虽然取得了规模上的快速扩张,但在效率提升上却收获甚微,动态地来看,中国做出口的优质企业可能会演变为更劣质的企业。