Exporting and Plant-Level Efficiency Gains: It's in the Measure

Gains from trade due to exporting can result from the reallocation of resources to more productive producers, or from efficiency increases within exporting firms over time. While there is strong evidence for the former, the latter has received little support in the data. Previous research has documented minuscule or no efficiency gains within exporting plants. This result is derived from revenue productivity measures and thus also reflects variation in prices. Using a census panel of Chilean manufacturing plants, we first show that, in line with the previous results, there is no evidence for within-plant increases in revenue productivity after export entry. We then derive product-plant level marginal cost and use it as an efficiency measure that is not affected by prices. We find that marginal costs drop substantially when plants begin to export – on average by 15-25%. Prices drop by the same order of magnitude (while volume grows). Since new exports initially charge lower prices, revenue productivity measures fail to identify these within-plant efficiency gains from exporting.