Handbook on Trade and Development
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Handbook on Trade and Development

Edited by Oliver Morrissey, Ricardo Lopez and Kishor Sharma

This Handbook comprehensively explores the complex relationships between trade and economic performance in developing countries. Insightful chapters cover issues such as trade, growth and poverty reduction; trade costs, facilitation and preferences; sub-Saharan Africa’s reliance on trade in primary commodities, informal cross-border trade, agglomeration and firm exporting; imported technology, exchange rates and the impact of firm exporting; the increasing importance of China in world trade and links between FDI and trade. This Handbook provides an essential overview of trade issues facing developing countries.
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Chapter 7: Trade and firm performance

Ricardo A. López


This chapter examines the channels by which international trade improves firms’ performance. There is a large amount of empirical research documenting the characteristics of firms that participate in international markets either as exporters, importers of intermediate inputs or buyers of foreign technology. These firms tend to be more productive, larger, more capital and skill intensive and pay higher wages compared to firms that participate solely in the domestic market. Because of data availability, most of the empirical studies focus on exporting. The main purpose of many of these studies is to determine the direction of the causality between exporting and measures of performance such as productivity, size and survival. There is also a growing body of literature studying the effect of importing intermediate inputs and foreign technology acquisition through licences on firms’ performance. The chapter describes the current state of the academic research, discusses the policy implications and how policy makers in developing countries can use international trade as a way to increase productivity and economic growth.

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