Macro/Finance Group, NIPFP

The positive correlation between firm productivity and export status is well established. This correlation can arise from multiple alternative casual models. We investigate these relationships, harnessing the transition of several firms from serving the domestic market to exporting, in a dataset of Indian firms from 1989 to 2015. Each firm which made the transition is matched against a control which did not. The transitions take place across many years, thus permitting a matched event study in firm outcomes. We find there is self-selection of more productive firms into exporting. Firms that make the transition become bigger, but there is little evidence of learning by exporting, of improvements in productivity right after exporting commences. However, there is evidence of improvement in productivity of export starters a couple of years before they begin to export.