Exporting raises productivity in sub-Saharan African manufacturing firms

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Now here’s something you don’t see every day – evidence that exporting raises firm-level productivity. The conventional evidence says that exporters are more productive because of selection effects rather than learning-by-exporting (Clerides, Lach, and Tybout, QJE, 1998). But things may be different in Africa:

Proponents of trade liberalization argue that exporting helps firms to achieve higher productivity levels. This hypothesis is examined for a panel of manufacturing firms in nine African countries. The results indicate that exporters in these countries are more productive and, more importantly, exporters increase their productivity advantage after entry into the export market. While the first finding can be explained by selection–only the most productive firms engage in exporting–the latter cannot. The results are robust when unobserved productivity differences and self-selection into the export market are controlled for using different econometric methods. Scale economies are shown to be an important channel for the productivity advance. Credit constraints and contract enforcement problems prevent firms that only produce for the domestic market from fully exploiting scale economies.

Johannes Van Biesebroeck (2005), “Exporting raises productivity in sub-Saharan African manufacturing firms,” Journal of International Economics, 62(2): 373-391.

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One Response to “Exporting raises productivity in sub-Saharan African manufacturing firms”

  1. ault Says:

    Makes sense that once a manufacturer is exposed to competing in a open marketplace that they will increase productivity to remain competitive or to increase profits (in addition to economies of scale). As so many sub-Saharan African markets are closed (by transport barriers if not governmental ones) the effect should be more pronounced for firms in that region.

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