Export, Productivity and Product Switching: The Case of Italian Manufacturing Firms

During the first half of the current decade, with rising competitive pressures, Italian manufacturing firms were forced to undertake a process of restructuring which had positive repercussions on export performance. This paper carries out empirical analysis using a panel of exporting firms obtained by matching firm-level information gathered by ISTAT and ISAE surveys. Two main channels of adjustment are investigated: inter and intra-firm. On the inter-firm side, we find that exporters were actually more productive: exporting was an essential outcome of pre-existing productivity advantages that led to self-selection of more productive businesses in international markets. As for the intra-firm adjustment, we show that the high frequency of product switching behaviour within exporting firms was significantly correlated with firm-level productivity growth, and that it contributed to a reallocation of economic activity within firms to more productive uses.