This Paper Conduct a rct to examine whether (and how access to export markets affects firm performance Focus on rug manufacturers in Egypt Generate exogenous variation in access to high-income export markets Our partners secured orders through marketing and trade fairs Provide a random set of rug producers with the opportunity to fill orders Treatment induces firms to export by reducing important trade friction-matching frictions between producers and overseas buyers 2) Track key performance metrics through regular firm surveys Record overall profits Production-line level data record Quantities, prices, rug specifications (rug-type, thread count etc) Direct measures of rug quality along 11 dimensions (e. g flatness of rug) At endline, firms paid to make identical domestic rug in " quality lab Track information flows between buyers, intermediary, producers
This Paper • Conduct a RCT to examine whether (and how) access to export markets affects firm performance – Focus on rug manufacturers in Egypt 1) Generate exogenous variation in access to high-income export markets – Our partners secured orders through marketing and trade fairs – Provide a random set of rug producers with the opportunity to fill orders • Treatment induces firms to export by reducing important trade friction—matching frictions between producers and overseas buyers 2) Track key performance metrics through regular firm surveys – Record overall profits – Production-line level data record: • Quantities, prices, rug specifications (rug-type, thread count etc) – Direct measures of rug quality along 11 dimensions (e.g. flatness of rug) – At endline, firms paid to make identical domestic rug in “quality lab” – Track information flows between buyers, intermediary, producers 16
Preview of results Firms provided with opportunity to export have 16-26% higher profits Explore sources of rise in profits Prices net of input costs rise, labor inputs rise, but quantities (m2 rug) fall Quality rises, productivity measures not adjusting for rug specifications fall (e.g m /hour) Two potential explanations No Learning: price of quality rises, firms upgrade specifications and hence quality( movement along the PPF Learning-by-exporting: export-induced changes in technical efficiency(shift out in the ppf Guided by a simple framework, five pieces of evidence for presence of lbe 1. Conditional on rug specifications, output/hour quality rise relative to control 2. On identical rugs, treatment has higher quality despite not taking longer to mfg 3. Evidence of learning curves 4. Quality improves most along the dimensions discussed with intermediary 5. Rule out alternative investment hypotheses 17
Preview of Results • Firms provided with opportunity to export have 16-26% higher profits • Explore sources of rise in profits: – Prices net of input costs rise, labor inputs rise, but quantities (m2 rug) fall – Quality rises, productivity measures not adjusting for rug specifications fall (e.g. m2 /hour) • Two potential explanations: – No Learning: price of quality rises, firms upgrade specifications and hence quality (movement along the PPF) – Learning-by-exporting: export-induced changes in technical efficiency (shift out in the PPF) • Guided by a simple framework, five pieces of evidence for presence of LBE: 1. Conditional on rug specifications, output/hour & quality rise relative to control 2. On identical rugs, treatment has higher quality despite not taking longer to mfg 3. Evidence of learning curves 4. Quality improves most along the dimensions discussed with intermediary 5. Rule out alternative investment hypotheses 17
Existing Literature Learning by exporting Clerides et al. 98, Bernard Jensen 99, Aw et al. 00, Van Biesebroeck 03, Blalcok Gertler 04, Javorcik 04, de Loecker 07: 10, Wagner 07, Lileeva Trefler 10, Aw et al 11, Marin Voigtlander 13 Large literature has struggled to convincingly solve either selection or measurement issue The rct combined with detailed data can directly address both Relationship between quality and exporting Schott 04, Hallak 06, Hallak 10, Verhoogen 08, Hallak Sividasan 13, Brambilla et al. 12 Crozet et al. 12, Roberts et al 11, Artopoulos et al 13, Manova Zhang 12, Bastos et al 14 Exception Marin Voigtlaender 13 Trade exposes firms in developing countries to sophisticated buyers Direct measures of product quality and rug specifications allow us to distinguish quality upgrading with and without learning Using RCTs to understand supply constraints in firms in developing countries del mel et al. 08: 10: 13. Bloom et al. 13 First paper to explore demand constraints using an RCt 18
Existing Literature • Learning by exporting: – Clerides et al. 98, Bernard & Jensen 99, Aw et al. 00, Van Biesebroeck 03, Blalcok & Gertler 04, Javorcik 04, de Loecker 07;10, Wagner 07, Lileeva & Trefler 10, Aw et al 11, Marin & Voigtlander 13 – Large literature has struggled to convincingly solve either selection or measurement issue – The RCT combined with detailed data can directly address both • Relationship between quality and exporting – Schott 04, Hallak 06, Hallak 10, Verhoogen 08, Hallak & Sividasan 13, Brambilla et al. 12, Crozet et al. 12, Roberts et al 11, Artopoulos et al 13, Manova & Zhang 12, Bastos et al 14 [exception Marin & Voigtlaender 13] – Trade exposes firms in developing countries to sophisticated buyers – Direct measures of product quality and rug specifications allow us to distinguish quality upgrading with and without learning • Using RCTs to understand supply constraints in firms in developing countries – del Mel et al. 08;10;13, Bloom et al. 13 – First paper to explore demand constraints using an RCT 18
Roadmap 1. Setting and Experimental Design 2. The causal effect of Export-Market Access on profits 3. Detecting Learning-by-Exporting 4. Conclusion
Roadmap 1. Setting and Experimental Design 2. The Causal Effect of Export-Market Access on Profits 3. Detecting Learning-by-Exporting 4. Conclusion 19
The Industry and the location Partnered with Aid to Artisans (ATA)as they started project in Egypt ATA acts in similar ways to Export Promotion Agency programs Lederman et al 09 1. Search for products that would appeal to consumers in high-income markets and can be priced competitively 2. Identify lead intermediary based in the developing country 3. Intermediary assists in finding small-scale producers to manufacture the products, and handles the export logistics 4. Ata then works intermediary to design and market appealing products 5. ATA's objective is to foster self-sustaining relationships whereby ata can pul out and the local intermediary maintains expands export sales
The Industry and the Location • Partnered with Aid to Artisans (ATA) as they started project in Egypt • ATA acts in similar ways to Export Promotion Agency programs Lederman et al 09 1. Search for products that would appeal to consumers in high-income markets and can be priced competitively 2. Identify lead intermediary based in the developing country 3. Intermediary assists in finding small-scale producers to manufacture the products, and handles the export logistics 4. ATA then works intermediary to design and market appealing products 5. ATA’s objective is to foster self-sustaining relationships whereby ATA can pull out and the local intermediary maintains/expands export sales 20