Importing, exporting and productivity in Irish manufacturing

Abstract

Research into firms ’ engagement with international markets has tra-ditionally focused on testing whether only the most productive firms can overcome a productivity threshold to enter export markets (se-lection), or whether firms that enter export markets observe a sub-sequent productivity improvement (learning). This paper contributes to a newer strand of the literature which acknowledges that firms may also engage with international markets through the importing of inter-mediate inputs. Two-way traders and exporters-only are significantly more productive than importers-only and non-trades. Selection and learning are tested for both importing and exporting. Fixed effects, Random Effects, GMM, Olley-Pakes, Levinson-Petrin and a modified structural estimator that accounts for endogenous choice of trading ac-tivity are used. Selection of the most productive firms into exporting is found to hold only for firms that are already importing intermedi-ates. Contrary to much of the literature, firms are found to learn from becoming both exporters and importers.

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