The model by Melitz (2003) predicts that if firms differ in their productivity (TFP) and there exist fixed costs of entry to export markets, the firms begin exporting if the productivity exceeds a certain threshold value. Productivity is thus a crucial factor behind firms' export market participation.

To verify this, I estimate a simple probit model of firms' decision to export, based on the Polish manufacturing firm-level data. Estimation of productivity of individual firms is troublesome as the standard OLS method produces biased estimates due to the endogeneity of factor choice. I use a multi-stage semi-parametric approach, as proposed by Olley and Pakes (1996) controlling for endogeneity, and the bias caused by firms exiting and entering the sample during the period under consideration. Besides determining the significance of the TFP coefficient in the probit regression, I examine the paths of productivity of firms entering the export market and make an attempt to identify the potential learning-by-exporting effects.

Keywords: productivity, exports, firm-level data.
JEL: F10, F14, D21, L60

  Jan Hagemejer, Factors driving the firms decision to export. Firm-level evidence from Poland - plik pdf; (545 KB)