TY  - JOUR
AU  - Lileeva,Alla
AU  - Trefler,Daniel
TI  - Improved Access to Foreign Markets Raises Plant-Level Productivity ... for Some Plants
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13297
PY  - 2007
Y2  - August 2007
UR  - http://www.nber.org/papers/w13297
L1  - http://www.nber.org/papers/w13297.pdf
N1  - Author contact info:
Alla Lileeva
York University
Toronto, Canada
E-Mail: lileeva@dept.econ.yorku.ca

Daniel Trefler
Rotman School of Management
University of Toronto
105 St. George Street
Toronto, ON M5S 3E6
CANADA
Tel: 416/946-7945
Fax: 416/978-5433
E-Mail: dtrefler@rotman.utoronto.ca
AB  - We weigh into the debate about whether rising productivity is ever a consequence rather than a cause of exporting. Exporting and investing to raise productivity are complimentary activities. For lower-productivity firms, incurring the fixed costs of such investments is justifiable only if accompanied by the larger sales volumes that come with exporting. Lower foreign tariffs will induce these firms to simultaneously export and invest in productivity. In contrast, lower foreign tariffs will induce higher-productivity firms to export without investing, as in Melitz (2003). We model this econometrically using a heterogeneous response model. Unique 'plant-specific' tariff cuts serve as our instrument for the decision of Canadian plants to start exporting to the United States. We find that those lower-productivity Canadian plants that were induced by the tariff cuts to start exporting (a) increased their labor productivity, (b) engaged in more product innovation, and (c) had high adoption rates of advanced manufacturing technologies.  These new exporters also increased their domestic (Canadian) market share at the expense of non-exporters, which suggests that the labor productivity gains reflect underlying gains in TFP. In contrast, we find no effects for higher-productivity plants, just as predicted by our complementarity theory.
ER  -