Firm Heterogeneity, Productivity, and the Extensive Margins of Trade – Differences Between Manufacturing Firms in East and West Germany
12 Pages Posted: 2 Apr 2019
Date Written: March 1, 2019
I investigate the relationship between the extensive margins of imports and exports (the number of countries traded with and the number of goods traded) and ﬁrm productivity using a newly constructed and rich panel data set of German manufacturing ﬁrms for the years 2009-2014. I do for the ﬁrst time construct a data set based on German trade data and ﬁrm data that accounts for the substantial change in the German register of ﬁrms statistics after 2012. The extensive margins are signiﬁcantly and positively associated with ﬁrm-level productivity both for West and East German ﬁrms in cross-sectional estimations, which is in line with the previous literature. Productivity is higher in ﬁrms that import and export more goods and trade with more countries. However, results based on panel analyses reveal that especially for East German ﬁrms the relationship becomes insigniﬁcant when unobserved ﬁrm heterogeneity is controlled for. The results point to a high degree of ﬁrm heterogeneity, of factors that are relevant and diﬀer within the ﬁrm only, for ﬁrms in East Germany.
Keywords: Extensive margins of trade, Firm Productivity, Germany, Firm Heterogeneity
JEL Classification: F14, L25, L60
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