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Exports and Profitability - First Evidence for German Manufacturing Firms

50 Pages Posted: 11 Nov 2008  

Helmut Fryges

Technopolis Group; University of Tasmania - Australian Innovation Research Centre; Center for European Economic Research (ZEW)

Joachim Wagner

University of Lueneburg - Institute of Economics; Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Economics; IZA Institute of Labor Economics

Multiple version iconThere are 3 versions of this paper

Date Written: 2008

Abstract

Using unique recently released nationally representative high-quality longitudinal data at the enterprise level for Germany, this paper presents the first comprehensive evidence on the relationship between exports and profitability. It documents that the positive profitability differential of exporters compared to non-exporters is statistically significant, though rather small, when observed firm characteristics and unobserved firm specific effects are controlled for. In contrast to nearly all empirical studies on the relationship between productivity and exports we do not find any evidence for selfselection of more profitable firms into export markets. Due to the sampling frame of the data used we cannot test the hypothesis that firms which start exporting perform better in the years after the start than their counterparts which do not start. Instead, we use a newly developed continuous treatment approach and show that exporting improves the profitability almost over the whole range of the export-sales ratio. Only firms that generate 90 percent and more of their total sales abroad do not benefit from exporting in terms of an increased rate of profit. This means, that the usually observed higher productivity of exporters is not completely absorbed by the extra costs of exporting or by higher wages paid by internationally active firms.

Keywords: exports, profitability, micro data, Germany

JEL Classification: F14, D21

Suggested Citation

Fryges, Helmut and Wagner, Joachim, Exports and Profitability - First Evidence for German Manufacturing Firms (2008). ZEW - Centre for European Economic Research Discussion Paper No. 08-085. Available at SSRN: https://ssrn.com/abstract=1298934 or http://dx.doi.org/10.2139/ssrn.1298934

Helmut Fryges (Contact Author)

Technopolis Group ( email )

Grosse Seestra├če 26
Frankfurt am Main, 60384
Germany

University of Tasmania - Australian Innovation Research Centre ( email )

1 College Road
Sandy Bay TAS, Tasmania 7005
Australia

HOME PAGE: http://www.utas.edu.au/airc

Center for European Economic Research (ZEW) ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

Joachim Wagner

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

University of Lueneburg - Institute of Economics ( email )

PO Box 2440
D-21314 Luneburg
Germany
+49 4131 677 2330 (Phone)
+49 4131 677 2026 (Fax)

HOME PAGE: http://www.uni-lueneburg.de/wifo

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Economics ( email )

Kahlaische Strasse 10
D-07745 Jena, 07745
Germany

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