Firm Heterogeneity and Trade in EU Countries: A Cross-Country Analysis

Abstract

Firms are heterogeneous, even within narrowly defined sectors. This article surveys the relevant theoretical and empirical literature on firm heterogeneity and external trade. By innovatively exploiting rich crosscountry micro-aggregated data sourced from the ECB Competitiveness Research Network (CompNet), this study investigates the main implications of firm heterogeneity for trade by EU countries, presenting a set of stylized facts. On the one hand, exporting firms are larger, more productive and pay higher wages than non-exporting firms. Indeed, only these firms are able to bear export costs arising from various factors, such as tariff and non-tariff trade barriers, the quality of the legal system or access to finance. Hence, only few enterprises actually export and the intensity of aggregate export concentration within a few large firms varies across countries and sectors. On the other hand, engaging in trade boosts individual firms' productivity growth via a number of channels and enhances allocative efficiency across firms, in turn increasing aggregate productivity growth. One of the main standard determinants of export growth, namely changes in the real effective exchange rate, impacts aggregate performance differently across countries depending on sectoral composition and on firm characteristics within a given sector.

Exporting and Firms’ Performance—What about Cooperatives? Evidence from Spain

“…Following the self-selection mechanism proposed by [30], the empirical literature has found that other characteristics, in addition to productivity, such as size, capital, technological intensity, skilled-labour intensity, are also important to understand the decision of firms to become involved or not in foreign markets [18][19][20][21][22].…”

“…There is widespread empirical evidence on the existence of the self-selection mechanism at country level, for instance [29] for US firms; [43] for Taiwanese and Korean firms; [38] for Colombian, Mexican and Moroccan; [44,45] for Vietnamese; [46] for Eastern European and Central Asian countries; [17,47] for China; [21,42] for Italian; [19,34] for India; [48] for the European Union, South America and China. [32] for Chile; [20] for Indonesia; [2] for the UK; [22] for 14 EU countries; [31] for Sweden.…”

“…The analysis of self-selection needs to differentiate cooperatives according to their export behaviour and to define new-exporters (analysis group) and non-exporters (control group). Diverse studies define new-exporters in different ways, probably influenced by the data restrictions (See, for instance, how the new-exporters are defined in studies such as [19,21,22,29,34,48,56,67]). Our problem is that the sample does not have enough cooperatives that, during the period, change their export status.…”

“…Table 3 shows firms' characteristics included in our analysis and the main descriptive statistics relating to our sample. In line with [19,[21][22][23]29], the dimensions of cooperatives' performance we take into account are as follow (See Appendix A for calculation details):…”

“…We examine how exporting cooperatives evolve and whether they differ from those that do not export. We go beyond the abundant literature that deals with the relationship between export and productivity (A survey of empirical studies over the relationship between export and productivity can be found in [15][16][17]) and, in line with studies such as [18][19][20][21][22], we test whether other characteristics of the cooperatives, apart from productivity, matter in order to understand differences in foreign market entry decisions.…”