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Using unique recently released nationally representative high-quality longitudinal data at the plant level, this paper presents the first comprehensive evidence on the relationship between exports and productivity for Germany, a leading actor on the world market for manufactured goods. It applies and extends the now standard approach from the international literature to document that the positive productivity differential of exporters compared to non-exporters is statistically significant, and substantial, even when observed firm characteristics and unobserved firm specific effects are controlled for. For West German plants (but not for East German plants) some empirical evidence for self-selection of more productive firms into export markets is found. There is no evidence for the hypothesis that plants which start to export perform better in the three years after the start than their counterparts which do not start to sell their products on the world market. Results for West Germany support the hypothesis that the productivity differential between exporters and nonexporters is at least in part the result of a market driven selection process in which those export starters that have low productivity at starting time fail as a successful exporter in the years after the start, and only those that were more productive at starting time continue to export.
This paper contributes to the flourishing literature on exports and productivity by using a unique newly available panel of exporting establishments from the manufacturing sector of Germany from 1995 to 2004 to test three hypotheses derived from a theoretical model by Hopenhayn (Econometrica 1992): (H1) Firms that stop exporting in year t were in t-1 less productive than firms that continue to export in t. (H2) Firms that start to export in year t are less productive than firms that export both in year t-1 and in year t. (H3) Firms from a cohort of export starters that still export in the last year of the panel were more productive in the start year than firms from the same cohort that stopped to export in between. While results for West Germany support all three hypotheses, this is only the case for (H1) and (H2) in East Germany.
This paper presents the first empirical test with German establishment level data of a hypothesis derived by Helpman, Melitz and Yeaple in a model that explains the decision of heterogeneous firms to serve foreign markets either trough exports or foreign direct investment: only the more productive firms choose to serve the foreign markets, and the most productive among this group will further choose to serve these markets via foreign direct investments. Using a non-parametric test for first order stochastic dominance it is shown that, in line with this hypothesis, the productivity distribution of foreign direct investors dominates that of exporters, which in turn dominates that of national market suppliers.
While the role of exports in promoting growth in general, and productivity in particular, has been investigated empirically using aggregate data for countries and industries for a long time, only recently have comprehensive longitudinal data at the firm level been used to look at the extent and causes of productivity differentials between exporters and their counterparts which sell on the domestic market only. This papers surveys the empirical strategies applied, and the results produced, in 45 microeconometric studies with data from 33 countries that were published between 1995 and 2004. Details aside, exporters are found to be more productive than non-exporters, and the more productive firms self-select into export markets, while exporting does not necessarily improve productivity.
The majority of empirical studies that centre on exporter performance and the determinants of export performance have focused mainly on the manufacturing sector, largely because there are very few datasets that facilitate a detailed investigation into the service sector. In 2008, however, the German Federal Statistical Office and the statistical offices of the Federal States released the German business services statistics panel (this dataset is described in more details in Chapter 2). Thus, for the first time, appropriate panel analyses of the export behaviour of German business services firms became possible. This thesis uses this panel dataset and contributes to the literature on the microeconometrics of international trade by providing evidence concerning the German business services sector. Overall, the results noted for exporter performance in the German business services sector correspond with those from the manufacturing sector. Chapter 3 shows that, similar to the manufacturing sector, exporting German business services firms are more productive and clearly larger (in terms of turnover and number of employed persons) than non-exporters, even when it is controlled for size and industry. Further, business services enterprises that export pay higher average wages (even when controlling for size and industry). When controlling for unobserved, time-invariant characteristics, the significant differences between exporters and non-exporters relative to productivity or average wages disappear, while significant export premia associated with the size variables continue to exist, but on a much smaller scale. Concerning the hypothesis that better performing enterprises self-select into export markets, the results indicate that in the business services sector as in the manufacturing sector, enterprises that begin to export are larger than non-exporters, even two years before they commence exporting operations. Regarding productivity (in terms of turnover per employed person) and average wages, the results were statistically significant only for business services enterprises in Germany’s western region. Aside from these similarities with the manufacturing sector, Chapter 4 presents evidence which suggests that, contrary to firms in the manufacturing industries, German business services firms do not benefit from exporting in terms of higher rates of profit. Chapter 4 documents a negative profitability differential of services exporters compared to non-exporters, and finds that export-starters in the business services sector are less profitable than non-exporters, even two years before they begin to export. Further, the estimated dose-response function, which is used to investigate the causal impact of exports on profits, shows an s-shaped relationship between profitability and firms’ export-sales ratio. Enterprises with a very small share of exports in total sales have a lower rate of profit than non-exporting firms. Then, with an increase in export intensity, the rate of profit increases as well. However, even at the maximum, the average profitability of the exporters is not, or is only slightly, higher than the average rate of profit of the non-exporting firms. Chapter 5 investigates the question which factors determine the export performance of German business services firms by estimating a model of the firms’ export intensity decision. Overall, the results support most of the explanations of export behaviour found in the literature for both service firms and manufacturing firms, such as the positive effects of size, human capital, and productivity. Yet when controlling for unobserved heterogeneity, the picture changes; notably, in the model with fixed effects, the significance of productivity and human capital disappears. This indicates that these variables are not positively related to the export performance per se, but are related instead to unobserved time-constant characteristics. Size still has a significant positive effect on exporting when controlling for unobserved effects. Finally, Chapter 6 considers the impact of the 2004 EU enlargement on service enterprises close to Germany’s eastern border by using regression-adjusted difference-in-differences estimators. The results suggest a small negative impact associated with the EU enlargement on export intensity and the turnover of large enterprises with an annual turnover of €250,000 or more, and no effect on the share of exporters and the turnover profitability of these enterprises. For small enterprises close to Germany’s eastern border, an increase in turnover and a decrease in profitability relative to other small enterprises are noted.
While it is a stylized fact that exporting firms pay higher wages than nonexporting firms, the direction of the link between exporting and wages is less clear. Using a rich set of German linked employer-employee panel data we follow over time plants that start to export. We show that the exporter wage premium does already exist in the years before firms start to export, and that it does not increase in the following years. Higher wages in exporting firms are thus due to self-selection of more productive, better paying firms into export markets; they are not caused by export activities.
Do exporters really pay higher wages? First evidence from German linked employer-employee data
(2006)
Many plant-level studies find that average wages in exporting firms are higher than in non-exporting firms from the same industry and region. This paper uses a large set of linked employer-employee data from Germany to analyze this exporter wage premium. We show that the wage differential becomes smaller but does not completely vanish when observable and unobservable characteristics of the employees and of the work place are controlled for. For example, blue-collar (white-collar) employees working in a plant with an export-sales ratio of 60 percent earn about 1.8 (0.9) percent more than similar employees in otherwise identical non-exporting plants.
The study empirically examines the long-term export behaviour of about 200 young technology-oriented companies from Germany and the UK. These firms were contacted by means of two surveys, in 1997 and 2003. In this study, three dimensions of firms’ international engagements are examined econometrically: foreign market entry and exit, degree of internationalisation (i.e., export-sales ratio), and the change of sales modes in international markets. Moreover, the causal relationship between a firm’s status of internationalisation and its performance (measured by the firm’s labour productivity as well as its employment and sales growth rates) is analysed.
We use comparable micro level panel data for 14 countries and a set of identically specified empirical models to investigate the relationship between exports and productivity. Our overall results are in line with the big picture that is by now familiar from the literature: Exporters are more productive than non-exporters when observed and unobserved heterogeneity are controlled for, and these exporter productivity premia tend to increase with the share of exports in total sales; there is strong evidence in favour of self-selection of more productive firms into export markets, but nearly no evidence in favour of the learning-by-exporting hypothesis. We document that the exporter premia differ considerably across countries in identically specified empirical models. In a meta-analysis of our results we find that countries that are more open and have more effective government report higher productivity premia. However, the level of development per se does not appear to be an explanation for the observed cross-country differences.
Using unique recently released nationally representative high-quality data at the plant level, this paper presents the first comprehensive evidence on the relationship between productivity and size of the export market for Germany, a leading actor on the world market for manufactured goods. It documents that firms that export to countries inside the euro-zone are more productive than firms that sell their products in Germany only, but less productive than firms that export to countries outside the euro-zone, too. This is in line with the hypothesis that export markets outside the euro-zone have higher entry costs that can only by paid by more productive firms.
