Export activity, persistence and mark-ups

Abstract

This paper addresses the differences in margins across exporting and non-exporting firms. We jointly estimate a translog cost function, a variable factor share equation and price-cost margin equations to analyze the effect of persistence in export activity on margins. Results indicate that non-exporters have smaller margins than persistent exporters and firms that entered foreign markets during the nineties. However, larger export ratio is negatively associated with margins for persistent exporters. It suggests that efficiency advantages for exporters are partially compensated by higher competitive pressure in international markets. These results are in accordance with the predictions of Melitz and Ottaviano (2005).