We exploit a panel dataset of Hungarian firms merged with product-level trade data for the period 1992-2003 to investigate the relation between firms’ trading activities (importing, exporting or both) and productivity. We find important self-selection effects of the most productive firms, with seemingly larger fixed costs characterising the importing activity. As a result, failing to control for the importing activity leads to overstated productivity premia of exporters. We are able to attribute the larger self-selection effect of imports to the higher complexity of the latter activity. To this extent we construct some new indexes which evaluate for each firm its fixed costs of trading in terms of number of products, distance of destinations and contractual frictions underlying each trade transaction, and relate those to firms’ productivity.
Original language | English |
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Publisher | MICRO-DYN |
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Number of pages | 29 |
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State | Published - 2011 |
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Name | MICRO-DYN Working Paper ; 08/11. |
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