Productivity differences by export destination

This paper investigates differences in productivity by destination market of firms exports. The total factor productivity (TFP) is used as measure of productivity. The productivity differences by export destination are estimated using multilevel approach considering the first destination country of the firm’s exports as the second level group of the model. The analysis is based on a dataset that provides comparable cross-country data of manufacturing firms in seven European countries (Austria, France, Germany, Hungary, Italy, Spain and the United Kingdom). The results are as follows. Productivity differs from market to market and, thus, it gives support to the expectations derived from Chaney’s model (2008). The estimates confirm that non-exporters are, on average, the less productive. On the contrary, the European firms that export to China and India register the highest positive difference. A positive difference also exists for firms that export to the USA and Canada. On the contrary, there is no relevant TFP difference for firms exporting to the EU-15 area. The difference is positive but slight for the Other Asian countries and Other EU countries, while it is negative for Other areas, Other non EU countries and Central and South America. Among firm-specific characteristics only size and sector membership help to explain the productivity differences by destination market and the role of size is by far the most dominant factor.