Department of Economics and Business Economics

Second Thoughts on the Exporter Productivity Premium

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Contrary to the prevailing interpretation, this paper shows that
the central models of trade with heterogeneous firms [Melitz (2003) and Bernard
et al.(2003)] exhibit ambiguous predictions for the exporter productivity
premium. This prospect arises due to differences between theoretical and
empirical representations of firm productivity. Instead of marginal
productivity we examine in both models the theoretical equivalent of
empirically observable productivity (value-added per employee). Given the
presence of fixed export costs or heterogeneous mark-ups and trade costs, the
observable productivity of exporters in proximity to the export-indifferent
firm turns out to be lower than that of non-exporters, i.e. the productivity
distributions overlap. The paper reviews empirical literature that reports
non-positive exporter productivity premia in firm-level data and discusses
implications for empirical research on exporter performance including learning,
and the role of non-parametric regressions (stochastic dominance, quantile
regressions), fixed costs and productivity distributions.
Original languageEnglish
JournalCanadian Journal of Economics
Pages (from-to)1310-1331
Publication statusPublished - 2012

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