Improved Access to Foreign Markets Raises Plant-Level Productivity… for Some Plants *

Daniel Trefler

893 citations0/0 files storedThe Quarterly Journal of Economics

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Global trade and economics International Business and FDI Economic and Technological Innovation

Abstract

Market size matters for innovation and hence for productivity. Improved access to foreign markets will thus encourage firms to simultaneously export and invest in raising productivity. We examine this insight using the responses of Canadian plants to the elimination of U.S. tariffs. Unique “plant-specific” tariff cuts serve as an instrument for changes in exporting. We find that Canadian plants that were induced by the tariff cuts to start exporting or to export more (a) increased their labor productivity, (b) engaged in more product innovation, and (c) had higher adoption rates for advanced manufacturing technologies. Further, these responses were heterogeneous.

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References

2003The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity 1999Exceptional exporter performance: cause, effect, or both?1998Is Learning by Exporting Important? Micro-Dynamic Evidence from Colombia, Mexico, and Morocco 2007Trade Liberalization, Intermediate Inputs, and Productivity: Evidence from Indonesia n.d.The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs.2007Do exports generate higher productivity? Evidence from Slovenia 2005Exporting raises productivity in sub-Saharan African manufacturing firms 2004The Long and Short of the Canada-U.S. Free Trade Agreement

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