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Title: The Role of EU Harmonization in Explaining the Export-Productivity Premium of Food Processing Firms
Authors: VANCAUTEREN, Mark 
Issue Date: 2012
Source: International Agricultural Trade Research Consortium, San Diego, USA, 9-11 December 2012
Abstract: Recent literature on firm-level heterogeneity and trade has emphasized a self-selection mechanism: only the most productive firms can recover the transaction (sunk) costs for serving foreign markets and become exporters. The role of trade integration is that a productivity gap between exporters and non-exporters becomes lower when the market becomes more integrated due to a fall in trade costs. The focus of this chapter is the role of EU harmonization of food regulations in explaining the intra-EU export-productivity premium. The food industry is an interesting case to examine because many directives and regulations of the Single Market Program concern this important economic sector and have the potential to affect trade and productivity. We use data on Dutch food processing firms for the 1979-2005 period which we link with a dataset that codes food products subject to EU harmonization. The paper confirms that more productive firms are more likely to enter the EU export market. The result of EU harmonization is that this probability increases. Second, we find a positive and significant export-productivity premium: that is, firms that export to other EU markets are more productive than non-exporting firms. This finding is robust to the estimation technique and the way we measured TFP growth. Third, when we test whether the export-productivity premium is affected by EU harmonization, we find weak evidence that is the case for Dutch food processing firms: much depends on the estimation method, the way we measure TFP growth, and the population of exporting firms.
Notes: This paper is forthcoming as a chapter in J.C. Beghin, ed., Non-Tariff Measures with Market Imperfections: Trade and Welfare Implications in the Frontiers of Economics and Globalization series Emerald Press
Keywords: technical barriers to trade; EU harmonization; exports; productivity; food firms
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Category: C2
Type: Conference Material
Appears in Collections:Research publications

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