Is the productivity premium of internationalized firms technology-driven?
Empirical Economics, forthcoming
34 Pages Posted: 6 Apr 2021
Date Written: June 4, 2020
We ask whether the productivity advantage of internationalized firms documented by the international trade literature can be more correctly interpreted in terms of proximity to the “technological frontier”. We provide a positive answer relying on a methodology (based on mixture models) to unbundle technology and TFP by estimating “technology-specific” production function parameters. Exploiting the detailed information provided by the EFIGE database (a sample of firms distributed across Austria, France, Germany, Hungary, Italy, Spain, United Kingdom), we report technology gaps (with respect to the frontier) more than three times larger than TFP gaps on average. We also find sizable technology advantages for firms undertaking FDI and/or exporting to other EU countries or to China, for importers of materials, and for firms having competitors in China and the US. Medium and large firms feature a larger technology premium, even more when they operate in country-sectors that are more exposed to import competition from China. Younger firms use better technologies but less effectively.
Keywords: TFP, technology, productivity premium, trade models with heterogeneous firms, selection effect
JEL Classification: F12, F14, D24, 033
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