Three essays on exporting, firm dynamics, and productivity growth (Taiwan, China)

Identifying the channels by which an economy yields productivity gains from trade, especially exports, is essential for understanding the importance of trade liberalization in economic growth. The first possible channel is that exporting provides a firm with income and incentives to adopt new technologies. The second channel is that exporting may increase productivity through its effect on firm scale and turnover. My dissertation investigates the existence and relative importance of these two channels using Taiwanese firm and industry level data.; The first chapter of my dissertation, "The Link between Exporting and Firm Performance," focuses on the causal relationship between a firm's export decision and its productivity growth. There are two alternative hypotheses: self-selection and learning-by-exporting. The former hypothesis suggests that productivity improvement begets export success, while the latter states that exporting begets a firm's productivity growth. Taiwanese manufacturing census data for the electronics industry (1986, 1991, and 1996) are used to test these two hypotheses.; The second chapter of my dissertation, "Large Real Exchange Rate Movements, Firm Dynamics, and Productivity Growth," theoretically and empirically explores how severe exchange rate shocks affect a firm's production scale and turnover decisions and how these decisions contribute to industry-level productivity growth. My theoretical model modifies Krugman's (1979) model by adding exchange rates to the monopolistic competition and increasing returns to scale framework. I use this model to explain how a firm responds to exchange rate shocks yielding two empirically testable predictions. First, real exchange rate appreciation reduces the number of domestic varieties, i.e. a net exit of domestic firms. Second, appreciation reduces a firm's exports but boosts its domestic sales. As a result, the relative magnitude of these two offsetting forces determines how appreciation affects the incumbent firm's total sales and labor productivity. Taiwanese firm-level data are used to conduct these tests.; In the third chapter of my dissertation, "Markups, Returns to Scale, and the Sources of Productivity Growth in Taiwanese Manufacturing Sector," I further investigate how large exchange rate movements affect productivity growth via various channels. Under the assumption of perfect competition and constant returns to scale, the Solow residual (or conventional TFP) perfectly reflects Hicks-neutral productivity growth. However, once these assumptions are relaxed, the conventional TFP includes Hick-neutral productivity growth, a measure of market competitiveness and a measure of scale economy. Using a combination of Trefler's (2001) and Harrison's (1994) frameworks, I estimate the impact of exchange rate movements on each element of conventional TFP growth and find that appreciation induces TFP growth through both enhancing production scale and stimulating capital growth. (Abstract shortened by UMI.)...