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Economic SYNOPSES short essays and reports on the economic issues of the day 2007 ■ Number 20 U.S. Exporters: A Rare Breed Rubén Hernández-Murillo .S. firms rarely engage in international trade. In 2000, for exporting firms in both employment and output (in both foreign example, there were 5.5 million firms in the United States; and domestic shipments).1 of these only about 4 percent were exporters. And the top Andrew Bernard and J. Bradford Jensen, along with co-authors, 10 percent of these exporters accounted for 96 percent of total argue that the higher initial productivity of exporters, combined U.S. exports. with higher output and employment growth after entry, suggests Not surprisingly, goods-producing firms account for the an important role for trade liberalization (a reduction of trade majority of exports (as measured by value). The table shows the barriers) in improving the aggregate productivity of the economy.2 distribution of exporting firms among 10 manufacturing indusThe reason is that a reduction in trade barriers would improve the tries ranked by their share of total manufacturing employment profits of existing exporting firms and would reduce the initial in 2002. Most manufacturing industries have some firms that productivity level necessary for additional firms to enter the export export, but the share of those firms in each industry is relatively market. This additional entry would, in turn, generate an increased small, varying between 12 and 38 percent for the larger industries demand for labor and therefore higher wages. Low-productivity and between 12 and 25 percent for the smaller industries. Furthernon-exporting firms would be forced to exit the industry, and both more, across all industries, on average, a firm’s foreign shipments capital and labor factors would be reallocated from the less efficient represent only a small proportion (never exceeding 21 percent) non-exporting firms to the more efficient exporting firms. This of total shipments. In manufacturing as a whole in 2002, only 18 would increase average productivity in the industry. Because the percent of firms were exporters and only about 14 percent of reallocation of factors occurs both within and across industries, this total firm shipments were exports. would translate into productivity gains for the entire economy. ■ Not only are exporting firms rare, they also stand out in several 1 Bernard, Andrew B. and Jensen, J. Bradford. “Exporting and Productivity in the ways: Studies show that exporting firms are more productive in USA.” Oxford Review of Economic Policy, 2004, 20(3), pp. 343-57. terms of value-added per worker and total factor productivity 2 Bernard, Andrew B.; Jensen, J. Bradford; Redding, Stephen J. and Schott, Peter K. and that they ship a higher volume of products. They use more “Firms in International Trade.” Journal of Economic Perspectives (forthcoming). skilled workers, capital, and sophisticated technology than nonexporting firms. They also pay higher wages and are more innovative. (These Industry Mean exports differences persist even after accountemployment % of % of firms as % of total ing for firm size and industry type.) share rank NAICS Industry firms that export shipments On the surface, exporting seems beneficial. So why don’t more firms 1 336 Transportation equipment 3.4 28 13 2 332 Fabricated metal product 19.9 14 12 export? One important distinction may 3 311 Food manufacturing 6.8 12 15 offer a clue: Although the productivity 4 334 Computer/electric product 4.5 38 21 level of exporting firms is higher than 5 333 Machinery manufacturing 9.0 33 16 that of non-exporting firms, their pro17 313 Textile mills 1.0 25 13 ductivity growth is not—which suggests 18 314 Textile product mills 1.9 12 12 that high productivity is a requirement 19 312 Beverage/tobacco product 0.7 23 7 for and not a consequence of engaging 20 324 Petroleum/coal product 0.4 18 12 in international trade. High entry costs 21 316 Leather/allied product 0.4 24 13 for exporting may be a barrier to all Aggregate manufacturing 100.0 18 14 but the most efficient firms. At the NOTE: NAICS, North American Industry Classification System. Data are from Bernard et al. (forthcoming) same time, economists have also found and the 2002 Census of Manufacturers. that once firms begin exporting they experience faster growth than non- U Views expressed do not necessarily reflect official positions of the Federal Reserve System. research.stlouisfed.org
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