#International trade imports and exports driver

In Figure 1 we show the average total factor productivity (TFP) premium of firms categorised by trade status with respect to the average TFP of the entire sample. Hence, we were able to directly relate the characteristics of each trade transaction to the firm’s productivity.įirst of all, we find evidence of a self-selection effect of the most productive firms into both the importing and exporting activities. As our data refer to import and export transactions which can be directly matched to the operations of manufacturing firms, we excluded transactions which take place through the activity of an intermediary or a wholesaler. To perform our analysis we exploited the availability of detailed product-country international transactions data of Hungarian manufacturing firms observed yearly from 1992 to 2003 (for a total of some 192,000 firm-level observations). These factors turn out to all be correlated with the productivity of trading firms – to a varied extent. Complexity may be defined by factors such as the number of products and countries involved in the firms’ international network, the quality and contractibility of the traded goods or the degree of substitutability with local products. This stems from our finding that the productivity of trading firms is heterogeneously related to various dimensions of “trade complexity”, that is, different characteristics of the bundle of goods that firms import or export. Thus, ignoring the import activity of an exporting firm might actually lead to a biased estimation of the productivity premium attributed to exporters, hence an excessive emphasis given to export promotion policies compared with policies aimed at integrating domestic firms into international networks of production.Īnother issue for policy is the composition of goods a firm imports and/or exports. In a recent paper (Altomonte and Békés, 2010), we show that in a small open economy increasingly integrated into global value chains, Hungary, both importing and exporting activities are closely related to productivity, suggesting that more productive firms self select into both exporting and importing. New evidence on the benefits of exports – and imports And yet, notwithstanding these findings, national trade policies to date still revolve around export promotion programmes, while they tend to neglect the relation between importing and exporting activities, the nature of traded products and the ensuing implications for firms’ performance. In addition, it has also been shown that importing intermediate goods tends to improve plant productivity in a number of countries.Īll the above evidence is consistent with the increasing role acquired by global value chains and international production networks in the world economy. More recently, evidence has been found that importers also have a variety of positive attributes, being bigger and more productive than non-importers, with both imports and exports appearing to be highly correlated and concentrated among firms.

#International trade imports and exports driver

A large economic literature as well as a number of policy success stories point to the superior performance of exporting firms in terms of size, wages and productivity, and thus the importance of an adequate openness to trade flows as a driver of competitiveness (see for example Yang 2009).