Exporting and Productivity in the United Kingdom by

This paper investigates various aspects of the links between exporting and productivity for a large sample of firms in the United Kingdom. We find evidence to support the proposition that sunk costs are important. Self selection takes place, with larger and more productive firms entering export markets, and firms have to become more productive in order to enter. Industry characteristics also affect the likelihood of entry—both industrial and spatial agglomeration are important. When we rely on an unmatched sample of firms we can find some evidence of further productivity improvement after entry, but this disappears when we use a matched sample. Our results suggest that policy should avoid simply subsidizing firms that may self select into export promotion policies and focus instead on reducing information asymmetries and supporting development of clusters.