Abstract
Canonical trade models predict that only the most productive firms export, yet in developing economies a significant share of exporters are among the least productive. This paper shows these firms often sell almost exclusively abroad ("only-exporters"), a phenomenon that can mute or reverse expected aggregate productivity effects from trade. I establish three stylized facts using cross-country and Chinese firm-level data: (i) only-exporters comprise roughly one-fifth of all exporters; (ii) they emerge from large, low-income countries with intense domestic competition and serve richer, less competitive foreign markets; and (iii) they are among the least productive firms. A trade model with non-homothetic preferences rationalizes this with an "exporting to escape" mechanism: intense domestic competition or low local income pushes the least productive firms to serve more favorable foreign markets. Using China’s WTO accession as a quasi-natural experiment, I show liberalization increased the prevalence and market share of these low-productivity firms. This reallocation toward the economy’s least productive segment muted, and in some industries reversed, expected aggregate productivity improvements. The findings show that the effect of trade integration are conditional on country characteristics and can cause aggregate productivity and welfare to decouple.
The seminar will be held in room 1249 (12th floor) at Eilert Sundts Hus. The address is Moltke Moes vei 31.