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DECTI Trade Seminar: Does Exporting Increase Productivity? Evidence from India

Sponsor: Development Economics and Chief Economist (DEC)

SpeakerMegha Mukim, London School of Economics

Abstract: Although there is much empirical evidence to show that more productive firms become exporters, the literature has been inconclusive regarding productivity benefits from exporting. This paper disentangles the direction of the causality to show that exporting improves firm performance. It uses Indian plant-level data (over 1989-2008) for over 15,000 firms across 2-digit product categories, to test for learning-by-exporting effects. In the paper, I generate measures of total factor productivity by estimating production functions using firmlevel data. I follow Olley and Pakes (1996) and use investment to deal with the problem of simultaneity and endogenous exit. To deal with the self-selection bias, I use a two-fold identification procedure: propensity score matching and instrumental variables techniques. I find that exporting has a strong positive effect on the productivity of exportmarket entrants, but that this effect tapers over time. My results are robust to different identification techniques and model specifications. This paper contributes to the empirical literature by measuring the effects of learning-by-exporting.

For Information: Anna Regina Rillo Bonfield

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