The Trade-Productivity Nexus in the European Economy Empirical Evidence from Firm Level Data

schungsschwerpunkt Internationale Wirtschaft, or FIW for short) organised the 15th FIW-Workshop which was dedicated to 'The Trade-Productivity Nexus in the European Economy', focusing on empirical evidence from firm level data. The Workshop took place on the premises of the Vienna Institute for International Economic Studies (wiiw) and was attended by a mixed audience of academics and policy makers. Given this 'dual' target audience the workshop consisted of two parts. The first part consisted of keynote speeches by two well-known economists in the field of international trade and the internationalisation of firms, while the second part took the form of a policy panel where policy makers and applied researchers discussed several issues related to export promotion policies. This FIW Special – International Economics takes the form of a policy report, summarising the main ideas, facts and results of the FIW workshop on 'The Trade-Productivity Nexus in the European Economy' that where presented during the first part of the workshop. We are very grateful to the keynote speakers of the workshop, Carlo Altomonte (Bocconi University) and Richard Kneller (University of Nottingham) who made very valuable contributions both to the workshop and to this policy report. Like the workshop this policy report starts out with an introduction to the topic in which Neil Foster (wiiw) and Roman Stöllinger (wiiw) review some stylised facts of the empirical heterogeneous firm literature using Austrian exporters as an example. This includes the so-called 'export premium' which refers to the fact that exporting firms are larger and more productive than their non-exporting peers as well as some initial findings on the performance of export starters, including the productivity growth path before and after export entry. The empirical evidence on the positive relationship between exporting and productivity is based mainly on country-specific studies due to the lack of comparable crosscountry data. At the workshop Carlo Altomonte presented new insights into the relationship between exporting and productivity by introducing the crosscountry dimension of the export behaviour and internationalisation strategies of European firms. This kind of analysis became possible due to a recently compiled crosscountry firm level data set covering seven European countries. The crosscountry dimension of the trade and productivity nexus is at the centre stage of the second chapter of this report. In particular, it reports on the role of productivity thresholds that induce exporting and other forms of internationalisation which are found to be fairly stable across countries. …