Exporting and Plant-Level Efficiency Gains: It's in the Measure

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.

Markups of Exporters and Importers: Evidence from Hungary

“…In this sense, our work reinforces the argument that levels and especially changes in TFPR are mainly driven by markups (Foster et al, 2008;Marin and Voigtländer, 2013). Changes in physical productivity mainly affect TFPR via markups.…”

“…This result qualifies existing findings of exporters' markup premia (De Loecker and Warzynski, 2012) but is in line with some event-study type evidence (Marin and Voigtländer, 2013). We argue that the lack of exporters' premium may result from the lower prices charged on the foreign market either because of stronger competition on those markets or dynamic pricing considerations, as suggested by Marin and Voigtländer (2013).…”

“…On the one hand, De Loecker and Warzynski (2012) and Bellone, Musso, Nesta and Warzynski (2014) have provided evidence that exporters also have higher markups than non-exporters. On the other hand, Marin and Voigtländer (2013), in contrast, found no markup premia for exporters.…”

“…In particular, as shown by Marin and Voigtländer (2013), revenue TFP can be decomposed in the following way. Let us denote the physical productivity of firm i with A i and its marginal cost by M C(A i , w i ), where w i is the vector of input prices.…”

“…9 Proof for this is in the online Appendix A.1 of the most recent version of Marin Third, when the identification is within-firm, one may assume (following Marin and Voigtländer, 2013) that changes in input prices are orthogonal to changes in the trade status. If this is the case, then TFPR and markup premia estimated within firm may reflect very similar quantities.…”