José Carlos Fariñas

Firm productivity and export markets: a non-parametric approach

Abstract This paper examines total factor productivity differences between exporting and non-exporting firms. These differences are documented on the basis of a sample of Spanish manufacturing firms over the period 1991–1996. The paper also examines two complementary explanations for the greater productivity of exporting firms: (1) the market selection hypothesis, and (2) the learning hypothesis. Non-parametric tests are proposed and implemented for testing these hypotheses. Results indicate clearly higher levels of productivity for exporting firms than for non-exporting firms. With respect to the relative merits of the selection and the learning hypotheses, we find evidence supporting the self-selection of more productive firms in the export market. The evidence in favor of learning-by-exporting is rather weak, and limited to younger exporters.

Firms' Growth, Size and Age: A Nonparametric Approach

This paper offers empirical evidence of firm failurerates as well as the mean of the distribution ofrealized growth rates, distinguishing between thesample of non-failing firms and the sample of allfirms, failing and non-failing. Attention is directedat identifying a set of characteristics, in particularthe size and age of firms, systematically related tothe patterns of firm growth and exit, using a panel ofSpanish manufacturing firms. The two maincontributions of the paper are the use ofnonparametric techniques and the analysis of issuesignored in other studies like theregression-to-the-mean bias and the measurement oflearning effects. We find evidence that failure ratesand the mean growth rate of successful firms declinewith size and age. When failing firms are integrated,there are no significant differences in the meangrowth rate across the age and size of firms.Regression-to-the-mean does not prove to be asubstantial factor behind the negative relationshipbetween size and growth of surviving firms.

Exporting and Economic Performance: Firm-Level Evidence of Spanish Manufacturing

In a previous paper, Delgado, Farinas and Ruano (2002) report TFP differences between exporters and non-exporters on the basis of a sample of Spanish manufacturing firms. In this paper, we extend the previous analysis in three directions using a similar data set. First, we investigate additional economic performance differences between exporters and non-exporters. Second, we measure TFP differences estimating production functions that control for unobserved heterogeneity and simultaneity bias. Third, we explore the self-selection and learning-by-exporting hypothesis as explanations for the greater performance of exporters. With respect to the results, we confirm that many indicators of economic performance such as productivity, size, wages and innovation are greater in exporting firms. Furthermore, TFP differences between exporters and non-exporters estimated with parametric methods are remarkably similar to those estimated using index numbers. Finally, performance differences and transition patterns between the export market and the domestic market indicate higher performance for entering exporters with respect to non-exporters at the moment of entry. We find evidence of selection in the entry and the exit side of the export market. One of the basic results that we obtain indicates that after controlling for self-selection, the productivity growth of entering exporters does not significantly change with respect to non-exporters. As the evidence we find indicates no systematic changes in performance between non-exporters and exporters after entry takes place, we do not confirm the learning-by-exporting hypothesis.

Foreign Sourcing and Productivity: Evidence at the Firm Level

The objective of this paper is to explore the relationship between foreign sourcing and productivity at the firm level. To organise the empirical work, we rely on Antras and Helpman’s model (2004), which predicts that high-productivity firms engage in trade (foreign sourcing) and low-productivity firms do not source abroad. The paper performs productivity comparisons between groups of firms sourcing abroad and firms which do not source abroad, applying non-parametric procedures to a sample of Spanish manufacturing firms. Our results indicate the existence of large and significant differences in productivity between firms that source abroad and those that do not. The productivity premium of foreign sourcing firms is robust to other characteristics that are associated with firm productivity. Furthermore, the evidence reported is consistent with self-selection of the most productive firms into the practice of sourcing abroad. The ex ante productivity distribution of firms that engage in foreign sourcing stochastically dominates the distribution of firms which do not source abroad. Finally, our estimates suggest that changing the intensity of foreign sourcing is a technology shifter for firms, and this has a direct impact on their total factor productivity.

The Dynamics of Productivity: A Decompostion Approach Using Distribution Functions

In this paper we use a micro panel data set of Spanish manufacturing firms to measure the contributions of continuing firms and turnover to total factor productivity growth over the period 1990–1997. The paper proposes an approach to the decomposition of productivity growth that is based on the estimation of productivity distributions. We characterize the dynamics of productivity distributions defining counterfactual distributions and using non-parametric methods. The results we obtain indicate that incumbent firms are the main factor contributing to the change in the productivity distribution. Net entry contributes positively to TFP growth. Finally, changes in the relative weights of incumbent, entering and exiting firms produce a counter-cyclical movement of productivity.

Assessing the impact of domestic outsourcing and offshoring on productivity at the firm level

The purpose of this article is to investigate the effects of domestic and foreign sourcing on firm-level productivity. We develop a simple framework that permits the introduction of both domestic outsourcing and offshoring in a conventional production function. We find that the decision to outsource has a positive impact on the level of productivity as it permits the relocation of parts of the production process to external suppliers. Furthermore, there is a positive impact on output resulting from domestic outsourcing and offshoring like any other input.

Profit Margins, Adjustment Costs and the Business Cycle: An Application to Spanish Manufacturing Firms

The objective of this paper is to investigate the cyclical behaviour of markups, using a panel of Spanish manufacturing firms over the period 1990--1998. Margins are estimated from the optimal conditions derived from the firms optimisation problem, which assumes that labour inputs are subject to adjustment costs. A number of results emerge from the estimations. First, we find positive and asymmetric adjustment costs for permanent labour inputs. Second, price--cost margins are markedly procyclical. Our estimates suggest that labour adjustment costs more than double the variability of average margins with respect to Lerner indexes. Third, we find differences in the parameters of the adjustment technology across industries which make markups of intermediate and production good industries more cyclical than consumer good industries. Finally, industry--specific price--cost margins are higher in more concentrated industries. Copyright Blackwell Publishing Ltd, 2003.

Sourcing strategies and productivity: evidence for spanish manufacturing firms

This paper explores the relationship between productivity and sourcing strategies using a sample of Spanish manufacturing firms. In this analysis we use different measures of productivity and alternative ways of grouping firms. Our results indicate that productivity differs systematically across groups of firms with different sourcing strategies. The ranking of productivities we observe is not fully consistent with the predictions of Antràs and Helpmans (2004) model but we confirm many partial aspects of the proposed ranking. In our preferred specifications, the productivity advantage is highest for firms that import inputs from foreign subsidiaries. Moreover, the group of firms that outsource in the domestic market is, in general, at the bottom of the productivity distribution, with firms that outsource abroad having an intermediate productivity advantage. When analysing the direction of causality between productivity and sourcing strategies, we find weak evidence of self-selection of firms into offshoring and no influence of relocation on firm productivity.

Multinational activity of European firms and heterogeneity

This paper offers an empirical assessment of the multinational activity of European firms. It takes the predictions of models of firm heterogeneity and FDI activity as a reference to explore the characteristics of multinational firms from 30 European countries. We use an original dataset, based on ORBIS, which links information of parent-affiliate pairs of firms. Our results show that more productive firms have greater multinational activity in terms of both scope, the number of foreign markets where they invest, and scale, the volume of local sales by subsidiaries active in foreign markets. The estimation of gravity equations shows that country characteristics that encourage multinational activity successively induce the entry of less productive parent firms. We confirm this asymmetry for the following variables: GDPs of the home and host countries, distance, contiguity and having a common colonial history.)