Trade and Productivity: Self-Selection or Learning-by-Exporting in India

33 Pages Posted: 24 May 2012 Last revised: 20 Jun 2013

Date Written: May 23, 2012

Abstract

Recent literature tried to explain the Indian growth miracle in different ways, ranging from trade liberalization to industrial reforms. Using data on Indian manufacturing firms, this paper analyzes the relationship between firm's productivity and export market participation during 1991-2004. While it provides evidence of the self-selection hypothesis by showing that more productive firms become exporters, the results do not show that entry into export markets enhances productivity. The paper examines the explanation of self selection hypothesis for total factor productivity differences across 33,510 exporting and non-exporting firms. It uses propensity score matching to test the learning-by-exporting hypothesis. In line with the prediction of recent heterogeneous firm models of international trade, the main finding of the paper is: more productive firms become exporters but it is not the case that learning by exporting is a channel fuelling growth in Indian manufacturing.

Keywords: trade, learning-by-exporting hypothesis, self-selection hypothesis, total factor productivity, causality, heterogeneous firm model

JEL Classification: C12, F10, F20, F40, L1, L2, L6

Suggested Citation

Haidar, Jamal Ibrahim, Trade and Productivity: Self-Selection or Learning-by-Exporting in India (May 23, 2012). Economic Modelling, Vol. 29(5), pages 1766-1773, Available at SSRN: https://ssrn.com/abstract=2065603

Jamal Ibrahim Haidar (Contact Author)

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

HOME PAGE: http://scholar.harvard.edu/haidar

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