Productivity Performance of Export Market Entry and Exit: Evidence from Indian Firms

This paper contributes to the literature on exporting and firm productivity, focusing on export entry (efficiency), learning (post-entry growth) and exit (inefficiency) by Indian firms. Drawing on 7000 firms during 1989-2009, our main objective is to examine the effect of exporting on firm productivity, correcting for selection bias using propensity-score matching, which allows a like-for-like comparison between new exporters and nonexporters. Robust to different matching estimators, we find evidence of learning-by-exporting that new exporters acquire rapid productivity growth after entry, relative to nonexporters. We also find that (1) exporters are more productive than nonexporters; (2) productive firms tend to self-select in entering the exporting market, and (3) least productive exporters are found to exit the export market as they experience adverse productivity effect prior to the year of exit. Our robust result on learning-by-exporting suggests that entering export market does appear to be a channel explaining the Indian recent growth miracle.