Productivity, Quality and Export Behaviour

Abstract

We find a robust negative correlation between Italian firms' productivity and their export share to low-income destinations. To account for this surprising fact, we marry Verhoogen (2008) with Eaton (2011), by introducing firm heterogeneity in product quality and country heterogeneity in quality consumption in a framework featuring firm and market-specific shocks in entry costs and demand, and estimate the model's parameters structurally by the simulated method of moments. The estimated preference for quality turns out to be monotonically increasing in foreign destinations' income. The model also predicts a negative correlation between firms' R&D intensity and their export share to low-income destinations, a finding supported by our data. Overall, our results strongly suggest high-quality firms should concentrate their sales in high-income markets.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 115 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.