Exporting and Firm Performance: Evidence from a Randomised Trial

Monday, 29 September, 2014
Atkin, Khandelwal and Osman (2017) conduct in this paper, published in the Quarterly Journal of Economics, a randomized experiment that generates exogenous variation in the access to foreign markets for rug producers in Egypt. Combined with detailed survey data, the authors causally identify the impact of exporting on firm performance. Treatment firms report 16–26% higher profits and exhibit large improvements in quality alongside reductions in output per hour relative to control firms. These findings do not simply reflect firms being offered higher margins to manufacture high-quality products that take longer to produce. Instead, the research finds evidence of learning-by-exporting whereby exporting improves technical efficiency. First, treatment firms have higher productivity and quality after controlling for rug specifications. Second,when asked to produce an identical domestic rug using the same inputs and same capital equipment, treatment firms produce higher quality rugs despite no difference in production time. Third, treatment firms exhibit learning curves overtime. Finally, the authors document knowledge transfers with quality increasing most along the specific dimensions that the knowledge pertained to.