Export Market Dynamics and Plant-Level Productivity: Impact of Tariff Reductions and Exchange-Rate Cycles

In this paper, we examine how changes in tariff rates and industry-specific real exchange rates affect the entry/exit process to export markets and productivity growth. Using the experience of the Canadian manufacturing sector over three decades, we find that firms in export markets enjoy faster productivity growth than non-participants. The size of the growth advantage depends on whether real exchange rates are increasing or decreasing. The increase in the value of the Canadian dollar during the post-2000 period almost completely offset the productivity growth advantages enjoyed by new exporters during this period.