Working Paper: NBER ID: w19033
Authors: Alvaro Garcia Marin; Nico Voigtländer
Abstract: While there is strong evidence for productivity-driven selection into exporting, the empirical literature has struggled to identify export-related efficiency gains within plants. Previous research typically derived revenue productivity (TFPR), which is downward biased if more efficient producers charge lower prices. Using a census panel of Chilean manufacturing plants, we compute plant-product level marginal cost as an efficiency measure that is not affected by output prices. For export entrant products, we find efficiency gains of 15-25%. Because markups remain relatively stable after export entry, most of these gains are passed on to customers in the form of lower prices, and are thus not reflected by TFPR. These results are confirmed when we use tariffs to predict export entry. We also document very similar results in Colombian and Mexican manufacturing plants. In addition, we find sizeable efficiency gains for tariff-induced export expansions of existing exporters. Only one quarter of these gains are reflected by TFPR, due to a partial rise in markups. Our results thus imply that within-plant gains from trade are substantially larger than previously documented. Evidence suggests that a complementarity between exporting and investment in technology is an important driver behind these gains.
Keywords: Exporting; Efficiency Gains; Productivity; Marginal Costs; Trade Policy
JEL Codes: D24; F14; L25; L60
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| efficiency gains (D61) | lower prices (P22) |
| export activity (F10) | productivity improvements (O49) |
| exporting and investment in technology (O39) | efficiency gains (D61) |
| export entry (F10) | efficiency gains (D61) |
| tariff-induced export expansions (F14) | efficiency gains (D61) |