Tariff Rates, Offshoring and Productivity: Evidence from German and Austrian Firm-Level Data

Hansen, Thorsten (April 2010): Tariff Rates, Offshoring and Productivity: Evidence from German and Austrian Firm-Level Data. Discussion Papers in Economics 2010-21

Abstract

This paper studies the impact of trade liberalization in terms of tarif cuts within the Eastern European enlargement on German and Austrian firm productivity. Unique matching of data from 1994 to 2003 suggests that tarif reductions raise parent firm productivity significantly. A ten percentage point decrease in tarif rates can lead to total factor productivity gains of up to 2 percent. The data allow distinction between three types of tarifs: output, intra-firm and input tarif rates. The size of the results strongly depends on the type of tarif and country analyzed.

• Item Type: Paper
• Form of publication: Preprint
• Keywords: tariff rates, intra-firm trade, productivity, trade liberalization
• Faculties: Economics; Economics > Munich Discussion Papers in Economics; Economics > Munich Discussion Papers in Economics > Economic Policy; Economics > Chairs > Chair of International Economics
• Subjects: 300 Social sciences > 300 Social sciences, sociology and anthropology; 300 Social sciences > 330 Economics
• JEL Classification: F12, F13, F23, L22, L23, O14
• Language: English

References

Acemoglu, D. and Zilibotti, F. (2001) \Productivity Dierences", Quarterly Journal of Economics, 116(2), pp. 563-606.

Ackerberg, D., Caves, K., and Frazer, G. (2005) \Structural Identication of Production Functions", Working paper, Dec. 2006 submitted to Econometrica.

Altomonte, C. and Bekes, G. (2008) \Trading Activities, Firms and Productivity", Bocconi University and Hungarian Academy of Science, mimeo, October.

Alvarez, R. and Crespi, G. (2007) \Multinational Firms and Productivity Catching-Up: The Case of Chilean Manufacturing", Central Bank of Chile, Working Paper, No. 429.

Amiti, M. and Konings, J. (2007) \Trade Liberalization, Intermediate Inputs, and Productivity: Evidence from Indonesia", American Economic Review, 97(5), pp. 1611-1638.

Austrian National Bank (OeNB) (2008) \Erzeugerpreis (Producer prices)", http://www.oenb.at [April, 21st, 2009].

Bernard, A.B. and Jensen, J.B. (1999) \Exceptional Exporter Performance: Cause, Effect, or Both?", Journal of International Economics, 47(1), pp. 1-25.

Bernard, A.B., Jensen, J.B., and Schott, P.K. (2006) \Trade Costs, Firms and Productivity", Journal of Monetary Economics, 53(5), pp. 917-937.

Bernard, A.B. andWagner, J. (1997) \Exports and Success in German Manufacturing", Review of World Economics, Weltwirtschaftliches Archiv, 133(1), pp. 134-157.

Bureau van Dijk, Electronic Publishing (2005) \Amadeus database", http://www.bvdep.com/de/Amadeus.html [April, 21st, 2009]. Frankfurt am Main.

Castellani, D., Serti, F., and Tomais, C. (2008) \Firms in International Trade: Importers and Exporters Heterogeneity in the Italian Manufacturing Industry", The World Economy, forthcoming.

De Locker, J. (2007) \Product Dierentiation, Multi-Product Firms and Estimating the Impact of Trade Liberalization on Productivity", Working Paper, New York University.

Dixit, A.K. and Stiglitz, J.E. (1977) \Monopolistic Competition and Optimum Product Diversity", American Economic Review, 67(3), pp. 297-308.

Economist, The (2008) \Beyond Doha", The Economist, print edition, October 11th, 2008.

Feenstra, R.C., Markusen, J.R., and Zeile, W. (1992) \Accounting for Growth with New Inputs: Theory and Evidence", American Economic Review, 82(2), pp. 415-421.

Fernandes, A.M. (2007) \Trade Policy, Trade Volumes and Plant-Level Productivity in Colombian Manufacturing Industries", Journal of International Economics, 71(1), pp. 52-71.

German Federal Statistical Office (2008a) \Verlagerung wirtschaftlicher Aktivit�aten - Erste Ergebnisse", Destatis, Berichtsjahr 2006, Wiesbaden.

German Federal Statistical Office (2008b) \Erzeugerpreisindizes (Producer prices)", http://www.destatis.de [April, 21st, 2009].

Görg, H., Hanley, A., and Strobl, E. (2008) \Productivity effects of International Outsourcing: Evidence from Plant Level data", Canadian Journal of Economics, 41(2), pp. 670-688.

Goldberg, P.K., Khandelwal, A., Pavcnik, N., and Topalova, P. (2008) \Imported Intermediate Inputs and Domestic Product Growth: Evidence from India", NBER, Working Paper, w14416.

Grossman, G. and Helpman, E. (1991) \Innovation and Growth in the Global Economy", MIT Press, Cambridge, Mass.

Hagemejer, J. and Kolasa, M. (2008) \Internationalization and Economic Performance of Enterprises: Evidence from Firm-Level Data", Munich Personal RePEc Archive, MPRA Paper, No. 8720, unpublished.

Halpern, L., Koren, M., and Szeidl, A. (2005) \Imports and Productivity", CEPR, Discussion Paper Series, No. 5139.

Harrison, A. (1994) \Productivity, Imperfect Competition and Trade Reform: Theory and Evidence", Journal of International Economics, 36(1-2), pp. 53-73.

Head, K. and Ries, J. (1999) \Rationalization Effects of Tarif Reductions", Journal of International Economics, 47(2), pp. 295-320.

Kasahara, H. and Lapham, B. (2008) \Productivity and the Decision to Import and Export: Theory and Evidence", CESifo, Working Paper Series, No. 2240, CESifo GmbH.

Kasahara, H. and Rodrigue, J. (2008) \Does the Use of Imported Intermediates Increase Productivity? Plant-Level Evidence", Journal of Development Economics, 87(1), pp. 106-118.

Krishna, P. and Mitra, D. (1998) \Trade Liberalization, Market Discipline and Productivity Growth: New Evidence from India", Journal of Development Economics, 56(2), pp. 447-462.

Levinsohn, J. and Petrin, A. (2003) \Estimating Production Functions Using Inputs to Control for Unobservables", Review of Economic Studies, 70(2), pp. 317-341.

Luong, T.A. (2008) \The Impact of Input and Output Tarifs on Firms' Productivity: Theory and Evidence", Princeton University, Working Paper.

Marchick, D.M. and Slaughter, M.J. (2008) \Global FDI Policy - Correcting a Protectionist Drift", The Bernard and Irene Schwartz Series on American Competitiveness, Council on Foreign Relations, CSR No. 34.

Marin, D. (2004) \A Nation of Poets and Thinkers: Less so with Eastern Enlargement? Austria and Germany", Centre for Economic Policy Research, CEPR Discussion Paper, No. 4358.

Marin, D. (2008) \The New Corporation in Europe", Bruegel Policy Brief, Issue 2008/07, Bruegel.

Marin, D. and Verdier, T. (2008) \The Corporate Hierarchies and the Size of Nations: Theory and Evidence", Centre for Economic Policy Research, CEPR Discussion Paper, No. 6734.

Mattoo, A. and Subramanian, A. (2008) \Multilateralism beyond Doha", Peterson Institute for International Economics, Working Paper Series, WP 08-8.

Mayer, T. and Ottaviano, G. (2007) \The Happy Few: New Facts on the Internationalisation of European Firms", Centre for Economic Policy Research, Policy Insight, No. 15.

Melitz, M.J. (2003) \The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity", Econometrica, 71(6), pp. 1695-1725.

Muendler, M. (2004) \Trade, Technology, and Productivity: A Study of Brazilian Manufacturers, 1986-1998", CESifo, Working Paper Series, No. 1148, CESifo GmbH.

Muuls, M. and Pisu, M. (2007) \Imports and Exports at the Level of the Firm: Evidence from Belgium", GEP, Research Paper Series, No. 2007/28.

Olley, G.S. and Pakes, A. (1996) \The Dynamics of Productivity in the Telecommunications Equipment Industry", Econometrica, 64(4),pp. 1263-1297.

Pakes, A. (1996) \Dynamic Structural Models, Problems and Prospects: Mixed Continuous Discrete Controls and Market Interaction ", in C. Sims (ed.) Advances in Econometrics, Sixth World Congress, Vol. II (Cambridge University Press) pp. 171-259.

Pavcnik, N. (2002) \Trade Liberalization, Exit, and Productivity Improvements: Evidence from Chilean Plants", The Review of Economic Studies, 69(1), pp. 245-276.

Schor, A. (2004) \Heterogeneous Productivity Response to Tarif Reduction. Evidence from Brazilian Manufacturing Firms", Journal of Developments Economics, 75(2), pp. 373-396.

Sjöholm, F. (1999) \Exports, Imports and Productivity: Results from Indonesian Establishment Data", World Development, 27(4), pp. 705-715.

Temouri, Y., Driffield, N.L., and Higon, D.A. (2008) \Analysis of Productivity Dierences among Foreign and Domestic Firms: Evidence from Germany", Review ofWorld Economics, 144(1), pp. 32-54.

Tomiura, E. (2007) \Foreign Outsourcing, Exporting, and FDI: A Productivity Comparison at the Firm Level", Journal of International Economics, 72(1), pp. 113-127.

Topalova, P. (2004) \Trade Liberalization and Firm Productivity: The Case of India", International Monetary Fund, Working Paper 04/28.

Trefler, D. (2004) \The Long and Short of the Canada-U.S. Free Trade Agreement", American Economic Review, 94(4), pp. 870-895.

Tybout, J.R. and Westbrook M.D. (1995) \Trade Liberalization and the Dimension of Eciency Change in Mexican Manufacturing Industries", Journal of International Economics, 39(1-2), pp. 53-78.

Vogel, A. and Wagner, J. (2008) \Higher Productivity in Importing German Manufacturing Firms: Self-Selection, Learning from Importing, or Both?", IZA, Discussion Paper Series, No. 3854.

Wagner, J. (2002) \The Causal Eects of Exports on Firm Size and Labor Productivity: First Evidence from a Matching Approach", Economic Letters, 77(2), pp. 287-292.

Wooldridge, J.M. (2005) \On Estimating Firm-Level Production Functions Using Proxy Variables to Control for Unobservables", Department of Economics, Working Paper, Michigan State University,Mimeo.

World Bank and United Nations Conference on Trade and De- velopment (UNCTAD) (2008) \World Integrated Trade Solution (WITS)", http://wits.worldbank.org/witsweb [April, 21st, 2009].

Yasar, M., Raciborski, R., and Poi, B. (2008) \Production Function Estimation in Stata Using the Olley and Pakes Method", The Stata Journal, 8(2), pp. 221-231.