Research Seminar "Estimating Production Function and Productivity Impact of Export Persistence using Revenue Data" (Amaresh K Tiwari)

Estimating Production Function and Productivity Impact of Export Persistence using Revenue Data

Amaresh K Tiwari (University of Tartu)

Wednesday, 27 March 2024 at 14.00-15.00 

Narva Rd 18 room 1024 and Zoom

As has been established, estimating a revenue production function in the presence of market imperfections is unlikely to identify the output elasticities of inputs or recover the 'true' total factor productivity (TFP). We present a novel method for estimating output elasticities and the productivity impact of endogenous decisions, such as the decision to export, for revenue and expenditures data. Without specifying a demand system, the method uses a transformation of the first order condition (FOC) for choosing the optimal amount of flexible input to transform the revenue growth function into output growth function. The resultant transformation, which uses growth rates of inputs, and the transformed FOC help estimate the output elasticities and the productivity impact of endogenous decisions in a simple one-step estimation of two equations. Using administrative and customs data from Estonia and Latvia, we find that the productivity impact of an additional year of exporting, reflecting the temporal pattern of the amount— in physical units—​ of the "core" product exported per employee, generally increases with export persistence. However, demand shocks, which affect firms' exporting behaviour, affect the productivity impact of persistence. Finally, while exporters charge lower markups than the non-exporters, the rate with which exporters increase their markups mirrors the productivity impact of number of years of exporting.

Co-authors: Nicolas Gavoille, Jaan Masso

Meeting ID 929 3534 2083

Passcode 403298