Exports, FDI and Productivity Micro evidence from Norway Andreas Moxnes University of Oslo April 2007 (Institute) Exports, FDI and Productivity 04/07 1 / 23
Introduction Trade intensity 0.50 0.45 0.40 0.35 0.30 0.25 0.20 0.15 Exports (constant) Exports (current) Outward FDI 0.10 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 (Institute) Exports, FDI and Productivity 04/07 2 / 23
Introduction Which rms export? Which rms are multinational? Exporters and MNEs are superior performers (Bernard & Jensen 1995, 1997a, 1997b, 1997c, etc). Ask whether a) good rms become international or whether b) international presence improves rm performance. My contribution: Provide evidence for both exporters and MNEs. Important for policy should governments promote growth through exporting or FDI? (Institute) Exports, FDI and Productivity 04/07 3 / 23
Theory Economics approach: a) Trade barriers imply that rms self-select into international markets Speci cally, Helpman-Melitz-Yeaple (2004): Fixed costs in FDI, (lower) xed costs + variable costs in exporting => Only the most e cient rms become MNEs Business literature approach b): "Learning by exporting". Competition is erce in international markets, exporters must therefore improve their performance to remain exporters (Institute) Exports, FDI and Productivity 04/07 4 / 23
Data Merged data sources from Statistics Norway The capital database (manufacturing + balance sheet statistics), all joint-stock manufacturing companies. 80% of total value added in 2001. Trade in commodities, imports and exports at the rm level, by country. Data from customs declarations. Outward FDI stocks. Foreign company report - Directorate of Taxes (Skattedirektoratets utenlandsoppgave). This constitutes an unbalanced panel of approx 8000 rms per year in the period 1999-2004.. (Institute) Exports, FDI and Productivity 04/07 5 / 23
How exceptional are they? 30-40% of all manufacturing rms are exporting in a given year But the median exporter only exports 3.5% of revenue (mean export share=.15) =) The top 10 percent exporters accounted for 91.3 pct of total exports in 2004. 1.5% of all manufacturing rms are conducting FDI in a given year (Institute) Exports, FDI and Productivity 04/07 6 / 23
How exceptional are they? Per cent 0 50 1999 2004 Export share Export share 0.5 1 0.5 1 Export share Graphs by aar (Institute) Exports, FDI and Productivity 04/07 7 / 23
How exceptional are they? Calculate export/fdi premia: x =performance measure D it =export/fdi dummy C it =controls (sector / size) x it = α + D 0 it β + C 0 it γ + ε it (1) (Institute) Exports, FDI and Productivity 04/07 8 / 23
How exceptional are they? Table 1 Export & MNE premia, per cent Export premia FDI premia 1999 Total employment (hours) Output 56.2 17 91.0 Value added per manhour 22.9 17 61.4 TFP 6.8 12 38.9 Average wage 5.1 10 35.5 Capital per manhour 64.8 9 70.8 No of firms 8025 8025 2004 Total employment (hours) Output 49.6 64.0 Value added per manhour 19.4 32.8 TFP 8.8 21.5 Average wage 6.8 32.2 Capital per manhour 39.6 37.3 No of firms 8023 8023 Numbers are coefficients on an export or FDI dummy in a regression of the form lnx = a + b*export + c*fdi + c*industry + d*lnemployment + e. All coefficients are significant at the.05% level. (Institute) Exports, FDI and Productivity 04/07 9 / 23
How exceptional are they? Empirical CDF for productivity, 2004 Empirical CDF 0.2.4.6.8 1 2 1 0 1 2 Productivity Fe0 Fe2 Fe1 (Institute) Exports, FDI and Productivity 04/07 10 / 23
Do good rms self-select into foreign markets? What is the performance of future exporters/mnes, ie. before they internationalize? x i0 = α + D 0 it β + C0 i0 γ + ε i (2) or x it 1 x i0 T 1 = α + D 0 it β + C0 i0 γ + ε i (3) on the subsamble that was not internationalized in t=0 (1999). (Institute) Exports, FDI and Productivity 04/07 11 / 23
Do good rms self-select into foreign markets? Table 2 Ex ante advantage in levels for future exporters & MNEs, 1999 2004, per cent Exports FDI Total employment Output 30.3*9 43.1 * (10.0) (2.9) Value added per worker 12.4*9 29.0 * (5.5) (2.7) TFP 1.8 4.1 (0.9) (0.5) Average wage 3.7*3 21.0 * (2.7) (3.1) Capital per worker 42.4* 114.5 * (6.8) (3.5) No of firms 3,194 5,085 Firms are included if they did not export or invest abroad in 1999. Firms may or may not have exported/invested the final year (2004). The numbers represent the premia for future exporters/mnes in the initial year, controlling for industry (2 digit NACE) and size. Numbers in parentheses are t statistics. (Institute) Exports, FDI and Productivity 04/07 12 / 23
Do good rms self-select into foreign markets? Table 3 Ex ante advantage in growth rates for future exporters/mnes, per cent Exports FDI Total employment 4.3* 3 8.8* (5.6) (3.6) Output 4.9* 5 8.1* (7.3) (3.4) Value added per worker 0.7 7.6* (0.8) (3.1) TFP 1.1 8.4* (1.3) (3.8) Average wage 1.8* 12.4 * (3.5) (6.0) Capital per worker 1.2 0.3 (0.7) (0.1) No of firms 2860 5165 Firms are included if they were not an exporter/mne in the initial year (1999). Firms may or may not have exported/invested abroad in the final year. The numbers represent the extra annual growth rates in firm characteristics for future MNEs, controlling for 2 digit (NACE) industry and firm size. Numbers in parentheses are t statistics. (Institute) Exports, FDI and Productivity 04/07 13 / 23
Does exporting/fdi improve performance? Compare growth rates of domestic vs. non-domestic rms x it T x i0 = α + D 0 i0β + C 0 i0 γ + ε i (4) (Institute) Exports, FDI and Productivity 04/07 14 / 23
Does exporting/fdi improve performance? Table 5 Performance of exporters/mnes versus domestic (annual growth rates) Exports FDI Total employment 2.2* 0.4 2.5 (5.7) (1.8) Output 0.3 0.1 (0.8) (0.1) Value added per worker 1.2* 0.5 2.6* (3.3) (2.1) TFP 0.2 0.5 1.6 (0.6) (1.4) Average wage 0.2 0.4 (0.7) (0.4) Capital per worker 3.2* 3.2 (4.8) (1.4) No of firms 5,166 5,166 The numbers represent the extra annual growth rates in firm characteristics for exporters/mnes, controlling for 2 digit (NACE) industry, size and average wage in the initial year. Numbers in parentheses are t statistics...mixed evidence (Institute) Exports, FDI and Productivity 04/07 15 / 23
Evidence on switching Large & persistent ows in and out of foreign activities Table 7 Switching in and out of exporting / FDI Exporters MNEs Entry Exit Entry Exit 2000 0.18 0.14 0.04 0.11 2001 0.17 0.16 0.11 0.03 2002 0.19 0.14 0.12 0.06 2003 0.21 0.12 0.11 0.15 2004 0.17 0.15 0.15 0.16 The numbers represent the share of exporters/mnes entering/exiting the exporter/mne market in each year. Previous regressions problematic because we only identify the exporting status of the rm in the rst year (1999) we do not identify entry & exit e ects. (Institute) Exports, FDI and Productivity 04/07 16 / 23
Evidence on switching Table 7b Switching in and out of exporting / FDI first time entrants/exits only Exporters MNEs Entry Exit Entry Exit 2000 0.18 0.14 0.04 0.11 2001 0.17 0.16 0.11 0.03 2002 0.17 0.13 0.12 0.06 2003 0.17 0.09 0.11 0.15 2004 0.12 0.10 0.12 0.16 The numbers represent the share of exporters/mnes entering/exiting the exporter/mne market in each year. (Institute) Exports, FDI and Productivity 04/07 17 / 23
Entry & exit Switching rms: Performance boost upon entry? Compare growth of rms entering/exiting/staying in foreign markets against purely domestic rms Note: Too few observations for MNE dummies. x it x i0 T = α + D 0 it β + C0 i0 γ + ε i (5) 0 1 Start it D it = @ Both it Stop it A (6) (Institute) Exports, FDI and Productivity 04/07 18 / 23
Entry & exit Table 8 Short run changes at starters stoppers, both, neither (Average Annual Growth Rates) Stop Both Start Total employment 0.4 1.0 6.0* 4.7 6.3* 5.6 (0.4) (10.7) (7.4) Output 2.3* 3.3 2.4* 5.0 6.9* 9.1 (3.0) (5.1) (9.6) Value added per worker 2.0 1.5 2.7* 0.8 0.4 3.1 (1.9) (4.1) (0.4) TFP 1.2 2.2 1.0 1.2 2.8 (1.2) (1.7) (1.3) Average wage 0.1 0.3 0.3 1.3 1.1 2.1 (0.2) (0.6) (1.8) Capital per worker 2.6 5.1* 4.7* (1.6) (5.2) (3.2) No of firms 35917 35917 35917 The numbers represent the extra annual growth rates in firm characteristics over rest of the period for exporters in the first year, controlling for two digit (NACE) industry, employment and average wage in the initial year. Numbers in parentheses are t statistics. (Institute) Exports, FDI and Productivity 04/07 19 / 23
Entry & exit Table 10 Long run changes at starters stoppers, both, neither (Average Annual Growth Rates) Stop Both Start Total employment 0.9 0.6 4.0* 2.1 4.3* 2.3 (1.3) (8.9) (7.6) Output 1.5* 1.4 2.2* 2.1 4.3* 3.2 (2.4) (5.2) (8.1) Value added per worker 2.0* 0.6 0.8* 0.6 0.9 (3.1) (2.1) (1.1) TFP 1.1 0.4 1.2* (2.0) (1.1) (2.4) Average wage 0.7 0.2 0.1 0.3 0.6 0.5 (1.6) (0.4) (1.7) Capital per worker 2.8* 3.8* 1.4 (2.4) (5.1) (1.5) No of firms 5,178 5,178 5,178 The numbers represent the extra annual growth rates in firm characteristics over rest of the period for exporters in the first year, controlling for two digit (NACE) industry, employment and average wage in the initial year. Numbers in parentheses are t statistics. (Institute) Exports, FDI and Productivity 04/07 20 / 23
The probability of death Large costs associated with rm failure Are internationalized rms bene ting from increased survival probabilities compared to domestic rms? Pr(Exit it ) = Φ(D 0 it β + C 0 it γ) (7) (Institute) Exports, FDI and Productivity 04/07 21 / 23
The probability of death Table 12 Exports, FDI and plant exit Coefficient Change in probability Intercept 0.44 (1.34) Export dummy 0.21 * 30.50 10 (11.14) MNE dummy 0.05 (0.72) Total employment 0.00 * 6.90 12 (3.55) Average wage 0.01 * 5.20 5 (2.06) No of firms 40,709 Year dummies yes Industry dummies yes The marginal effects represent the increase in the probability of firm exit from a one standard deviation increase in the variable (or a switch from 0 1 for the export/fdi dummy). The probabilities are evaluated for each firm and then aggregated. (Institute) Exports, FDI and Productivity 04/07 22 / 23
Summing up Good rms self-select into foreign markets (a) The future gains from exporting/fdi today are mixed - Scale e ects but not productivity e ects (not b) Internationalized rms have a signi cantly lower probability of death. Aggregate productivity growth because of selection? MNEs are generally better performers than exporters. Identi cation problem: a) Most MNEs are also exporters + b) Few observations =) hard to locate marginal e ects for MNEs. (Institute) Exports, FDI and Productivity 04/07 23 / 23