Export and Productivity in Global Value Chains: Comparative Evidence from Latvia and Estonia

University of Tartu - Faculty of Economics and Business Administration Working Paper Series, No. 107, 2018

38 Pages Posted: 23 Jan 2018

See all articles by Konstantins Benkovskis

Konstantins Benkovskis

Bank of Latvia; Stockholm School of Economics in Riga

Jaan Masso

University of Tartu - Faculty of Economics and Business Administration

Olegs Tkacevs

Latvijas Banka

Priit Vahter

University of Tartu - Faculty of Economics and Business Administration

Naomitsu Yashiro

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO)

Date Written: January 15, 2018

Abstract

This paper investigates the effect of export entry on productivity, employment and wages of Latvian and Estonian firms in the context of global value chain (GVC). Like in many countries, exporting firms in Latvia and Estonia are more productive, larger, pay higher wages and are more capital intensive than non-exporting firms. While this is partly because firms that are originally more productive and have better performances are more likely to enter export, Latvian and Estonian firms also realise more than 23% and 14% higher labour productivity level as the result of export entry. Export entry also increases employment and average wages. Gains in productivity and employment are particularly large when firms enter exports that are related to participation in knowledge-intensive activities found in the upstream of GVC. For instance, Latvian firms that start exporting intermediate goods or non-transport services (which include knowledge intensive services) enjoy significantly higher productivity gains than those starting to export final goods or transport services. These findings underscore the importance of innovation policies that strengthen firms’ capabilities to supply highly differentiated knowledge-intensive goods and services to GVC.

Keywords: Productivity, Global Value Chain, Export, Latvia, Estonia

JEL Classification: F12, F14, O19, O57

Suggested Citation

Benkovskis, Konstantins and Masso, Jaan and Tkacevs, Olegs and Vahter, Priit and Yashiro, Naomitsu, Export and Productivity in Global Value Chains: Comparative Evidence from Latvia and Estonia (January 15, 2018). University of Tartu - Faculty of Economics and Business Administration Working Paper Series, No. 107, 2018, Available at SSRN: https://ssrn.com/abstract=3102382 or http://dx.doi.org/10.2139/ssrn.3102382

Konstantins Benkovskis (Contact Author)

Bank of Latvia ( email )

Riga
Latvia

Stockholm School of Economics in Riga ( email )

Strelnieku iela 4a
Riga, LV 1010
Latvia

Jaan Masso

University of Tartu - Faculty of Economics and Business Administration ( email )

Narva Road 4-A110
Tartu 51009
Estonia
+ 372 7 375 842 (Phone)

Olegs Tkacevs

Latvijas Banka ( email )

K. Valdemara iela 2a
Riga LV-1050
Latvia

Priit Vahter

University of Tartu - Faculty of Economics and Business Administration ( email )

Narva Rd. 4-A214
Tartu 51009, 51009
Estonia

Naomitsu Yashiro

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO) ( email )

2 rue Andre Pascal
Paris Cedex 16, MO 63108
France

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