Exporting-and-Plant-Level-Efficiency-GainsIts-in-t

NBERWORKINGPAPERSERIESEXPORTINGANDPLANT-LEVELEFFICIENCYGAINS:IT’SINTHEMEASUREAlvaroGarciaMarinNicoVoigtländerWorkingPaper19033ólicadeChile,UCLA,andUniversidaddeChileforhelpfulcommentsandsuggestions.NicoVoigtlaenderacknowledgesresearchsupportfromtheUCLAEastonTechnologyLeadershipProgram.TheviewsexpressedhereinarethoseoftheauthorsanddonotnecessarilyreflecttheviewsoftheNationalBureauofEconomicResearch.NBERworkingpapersarecirculatedfordiscussionandcommentpurposes.Theyhavenotbeenpeer-reviewedorbeensubjecttothereviewbytheNBERBoardofDirectorsthataccompaniesofficialNBERpublications.©2013byAlvaroGarciaMarinandNicoVoigtländer.Allrightsreserved.Shortsectionsoftext,nottoexceedtwoparagraphs,maybequotedwithoutexplicitpermissionprovidedthatfullcredit,including©notice,isgiventothesource.ExportingandPlant-LevelEfficiencyGains:It’sintheMeasureAlvaroGarciaMarinandNicoVoigtländerNBERWorkingPaperNo.19033May2013JELNo.D24,F14,L25,L60ABSTRACTGainsfromtradeduetoexportingcanresultfromthereallocationofresourcestomoreproductiveproducers,orfromefficiencyincreaseswithinexportingfirmsovertime.Whilethereisstrongevidencefortheformer,thelatterhasreceivedlittlesupportinthedata.Previousresearchhasdocumentedminusculeornoefficiencygainswithinexportingplants.Thisresultisderivedfromrevenueproductivitymeasuresandthusalsoreflectsvariationinprices.UsingacensuspanelofChileanmanufacturingplants,wefirstshowthat,inlinewiththepreviousresults,thereisnoevidenceforwithin-plantincreasesinrevenueproductivityafterexportentry.Wethenderiveproduct-plantlevelmarginalcostanduseitasanefficiencymeasurethatisnotaffectedbyprices.Wefindthatmarginalcostsdropsubstantiallywhenplantsbegintoexport–onaverageby15-25%.Pricesdropbythesameorderofmagnitude(whilevolumegrows).Sincenewexportsinitiallychargelowerprices,revenueproductivitymeasuresfailtoidentifythesewithin-plantefficiencygainsfromexporting.AlvaroGarciaMarin110WestwoodPlUCLAAndersonSchoolLosAngeles,[e-mail]änderUCLAAndersonSchoolofManagement110WestwoodPlazaC513EntrepreneursHallLosAngeles,[e-mail]ilableat:ficantlymoreproductivethantheirnon-exportingcoun-terparts,empiricalstudiestypicallyfindthatnewexportersdonotincreasetheirproductivityovertime.Thissuggeststhatselectionofthemostproductiveplantsintoexporting,ratherthaneffi-ciencygainswithinplants,isresponsibleforaggregateproductivitygainsfromtradecompetition.Theselectioneffectacrossplantshasreceivedstrongtheoreticalandempiricalsupport(c.f.Melitz,2003;Pavcnik,2002;Bloom,Draca,andvanReenen,2012).Ontheotherhand,within-plantpro-ductivitygainsafterexportentryaretypicallyfoundtobesmallandinsignificant(c.f.Clerides,Lach,andTybout,1998;BernardandJensen,1999;Wagner,2012).1Thisnon-resultissurprising,giventhatexporterscanlearnfrominternationalbuyersandhaveaccesstolargermarketstoreapthebenefitsofinnovationorinvestmentsinproductivetechnology.Inthispaper,weshowthatthemissingevidenceonwithin-plantefficiencygainsafterexportentryisanartefactofthemeasure:previousstudieshavetypicallyusedrevenue-basedproductiv-ity,whichisaffectedbychangesinprices.Ifgainsinphysicalproductivityarepassedontobuyersintheformoflowerprices,thenrevenue-basedproductivitywillbedownwardbiased.Addressingthiscaveatbymeasuringphysicalproductivityisdifficult.Forexample,changesinproductqual-itymakephysicalunitsofoutputincomparable–evenwithinproductsfromgivenplants.Thus,meaningfulresultscanonlybederivedforphysicallyhomogenousproducts(Foster,Haltiwanger,andSyverson,2008)–asmallsubsetofallexportedgoods.Tobypassthisissue,wefirstapplythemethodpioneeredbyDeLoeckerandWarzynski(2012)toderiveplant-productlevelmarkupsinarichpanelofChileanestablishments.Second,becauseourdatasetcomprisesphysicalunitsaswellasrevenuesforeachproduct-plantpair,wecancalculateproductprices(unitvalues).Di-vidingthesebythecorrespondingmarkupsallowsustoidentifymarginalcosts.Thisprocedureisflexiblewithrespecttotheunderlyingpricesettingmodelandthefunctionalformofthepro-ductionfunction(e.g.,allowingfordifferentdegreesofreturnstoscale).2Instandardproductionfunctions,marginalcostsaredirectly(inversely)relatedtophysicalproductivity,andarethusagoodcandidateforanalyzingwithin-plantefficiencygainsafterexportentry.Wefindthatgainsfromexportingaresubstantial:marginalcostswithinplant-productcate-goriesdropbyapproximately15-25%duringthefirstthreeyearsafterexportentry.Atthesametime,inlinewithpreviousfindings,revenueproductivitydoesnotchangewithinexportingplants.Thisisduetopricesfallingbyasimilarmagnitudeasmarginalcosts–newexporterspassphysical1Theexceptionaretwoarticlesinspecificempiricalsettings–DeLoec