Firm Productivity and Exports: Evidence from Ethiopian Manufacturing

This paper examines the causal relationship between exporting and productivity using plant-level panel data for Ethiopian manufacturing. We trace the trajectory of total factor productivity and other productivity measures of groups of firms classified by their export history. We tested learning-by-exporting using a one-step system-general method of moments approach with the export-status included directly in the production function. We found strong evidence of not only self-selection but also learning-by-exporting. Depending on the specification previous exporting appears to have shifted the production function by 15–26 per cent. Exporters had on average three times more employees, and paid 1.6 times higher average wage than non-exporters.