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

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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.
Original languageEnglish
Place of publicationAarhus
PublisherDepartment of Economics and Business, Aarhus University
Number of pages27
ISBN (Print)9788778825858
ISBN (Electronic)9788778825865
Publication statusPublished - 2011

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