The Effects of Exporting on Labour Productivity: Evidence from German Firms

We revisit the "self-selection vs. learning-by-exporting (LBE)" debate with new evidence on a large panel of German firms of all economic sectors up to the 3-digit NACE level, between 1993-2014, and shed new light on the channels that foster export-induced productivity gains. In line with previous results, we find substantial pre-export differences in productivity between future exporters and domestic firms. Nevertheless, these pre-export differences remain constant over time and we find strong evidence against a conscious self-selection effect, in which firms would actively engage in increasing their productivity in temporal proximity to starting to export. In contrast, we find strong support for the learning-by-exporting hypothesis in both the manufacturing and the services sector. However, the learning effect is not progressive and more short-lived in the latter than in the former. We explain the different sectoral performances with significant differences in access to foreign markets, which is substantially lower and more concentrated within few firms in services. Furthermore, we show that across sectors, the size of the LBE effect depends on the level of within-sector competition. In line with basic microeconomic theory, productivity gains are higher for entrants into exporting, which operate in relatively uncompetitive domestic sectors, pointing to an important competitiveness channel for productivity gains. Our results suggest that the services sector offers the largest scope for productivity gains through trade policies aiming at facilitating market access.