Productivity and turnover in the export market: Micro-level evidence from the Republic of Korea and Taiwan (China)

Widespread empirical Evidence indicates that exporting producers have highe r productivity than nonexporters, although the reasons why are unclear. Som e analysts argue that exporters acquire knowledge of new production methods , inputs, and product designs from their international contacts, and with t his knowledge they achieve higher productivity than their more insulated do mestic counterparts. Others argue that the higher productivity of exporters reflects the self-selection of more efficient producers into a highly comp etitive export market. This article analyzes the link between a producer's total factor productivity and its decision to participate in the export mar ket, using manufacturing data from the Republic of Korea and Taiwan (China) . Differences are found between these two economies in the importance of sele ction and learning. In Taiwan (China) transitions of plants into and out of the export market reflect systematic variations in productivity as predict ed by self-selection models. In Korea there are no significant changes in p roductivity following entry or exit from the export market that ave consist ent with learning from exporting. A comparison of the two economies suggest s that in Korea factors other than production efficiency are more prominent determinants of the export decision.