manufacturing labor share decline, foreign demand and
TRANSCRIPT
Motivation Data and Stylized Facts Theory Empirical Framework Results Conclusion
Manufacturing Labor Share Decline, Foreign Demand andSuperstar Exporters
Ludovic Panon
Sciences Po
December 4, 2019
1 / 26
Motivation Data and Stylized Facts Theory Empirical Framework Results Conclusion
Motivation
⢠Labor share and international trade
{Import side: usual focusExport side: limited empirical evidence
⢠Ambiguous link between export demand and labor share
⢠Important economic and political question because of increasing trade integration
⢠What is the impact of the export side of international trade on the labor share?
2 / 26
Motivation Data and Stylized Facts Theory Empirical Framework Results Conclusion
This Paper
1 New mechanism: foreign demand growth reduces manufacturing labor share
â Disproportionate growth of low-labor share exporters
â Negative effect on labor share of exporters
2 Quantification
3 / 26
Motivation Data and Stylized Facts Theory Empirical Framework Results Conclusion
This Paper
1 New mechanism: foreign demand growth reduces manufacturing labor share
â Disproportionate growth of low-labor share exporters
â Negative effect on labor share of exporters
2 Quantification
3 / 26
Motivation Data and Stylized Facts Theory Empirical Framework Results Conclusion
Theoretical Framework
⢠Marshallâs Second Law of Demand =â larger firms have lower labor share
⢠Foreign demand rise increases market size and competition
⢠Output reallocation towards larger firms
4 / 26
Motivation Data and Stylized Facts Theory Empirical Framework Results Conclusion
Empirical Framework
⢠Identification: exogenous shift-share firm-level foreign demand measure
⢠Foreign demand growth explains 3% of observed reallocation effect
⢠Between and within-firm effects: 0.5 pp decrease in manufacturing labor share (12% of totalchange)
5 / 26
Motivation Data and Stylized Facts Theory Empirical Framework Results Conclusion
Related Literature
⢠Labor Share Decline: Elsby et al. (2013); Karabarbounis and Neiman (2014); Autor et al.(2017); De Loecker and Eeckhout (2017, 2018); Aghion e al. (2019); Lashkari et al. (2019);Mertens (2019); Reshef and Santoni (2019)
â Contribution: Role of foreign demand
⢠Variable Markups and Trade in Monopolistic Competition: Krugman (1979); Zhelobodko etal. (2012); Mayer et al. (2016); Mrazova and Neary (2017)
â Contribution: Heterogeneous effect of foreign demand on firm growth and labor share
⢠Demand and Firm Growth: Hottman et al. (2016); Parenti et al. (2017); Aghion et al. (2018)
â Contribution: Quantify role of foreign demand on labor share
6 / 26
Motivation Data and Stylized Facts Theory Empirical Framework Results Conclusion
Outline of the Talk
1 Motivation
2 Data and Stylized Facts
3 Theory
4 Empirical Framework
5 Results
6 Conclusion
7 / 26
Motivation Data and Stylized Facts Theory Empirical Framework Results Conclusion
Data Sources
⢠French firm-level data for manufacturing sector from 1994 to 2001:
â Fiscal files (firm-level): FICUS
â Firm-year-product-country trade data from French customs
â Bilateral trade flows at HS6 level from CEPII (BACI-Comtrade)
⢠Keep exporting firms in manufacturing (Sectors 15-37 NAF Rev.1)Sample Selection Period
8 / 26
Motivation Data and Stylized Facts Theory Empirical Framework Results Conclusion
Export Increase Exports/GDP Exports by Industry
120
140
160
180
200
220
Expo
rt S
ales
(Bill
ions
)
1994 1995 1996 1997 1998 1999 2000 2001Year
9 / 26
Motivation Data and Stylized Facts Theory Empirical Framework Results Conclusion
Manufacturing Labor Share Decline Macro Data OECD Countries
53
54
55
56
57
58
Labo
r Sha
re (i
n %
)
1994 1995 1996 1997 1998 1999 2000 2001Year
10 / 26
Motivation Data and Stylized Facts Theory Empirical Framework Results Conclusion
Decomposition of Labor Share Changes
⢠Manufacturing labor share:LSt = â
iĎit︸︡︡︸
Value-added weight
LSit (1)
⢠Change between tâ 1 and t can be decomposed into four effects:
1 Within-firm effect: distribution of firm-level labor shares might shift downards
2 Between-firm (reallocation) effect: output (value-added) reallocation towards low-labor sharefirms
3 Entry
4 Exit
Decomposition FHK Decomposition MP Decomposition
11 / 26
Motivation Data and Stylized Facts Theory Empirical Framework Results Conclusion
Importance of Between-Firm ComponentFHK Exporters FHK Whole Sample MP Exporters MP Whole Sample
-6
-4
-2
0
2
4
Cum
ulat
ive
Cha
nge
1994 1995 1996 1997 1998 1999 2000 2001Year
Aggregate Within Between Entry-Exit
12 / 26
Motivation Data and Stylized Facts Theory Empirical Framework Results Conclusion
Superstar Exporters Have a Lower Labor Share
Statistic Labor ShareInternationalization Measure Above Median Top 25 % Top 10 % Top 1 %
(1) (2) (3) (4)Export intensity 70.7 69.5 67.5 64.1ln Export sales 70 67.9 64.8 58.8ln # Products exported 70.4 69.6 68.5 65.5ln # Destinations served 70 69 67.5 63.4
# Firms 29,220 14,610 5,844 585
Regression Analysis T-Tests
13 / 26
Motivation Data and Stylized Facts Theory Empirical Framework Results Conclusion
Marshallâs Second Law of Demand
⢠Inverse demand elasticity: Ďp(xi) := â âp(xi)/âxip(xi)/xi
⢠MSLD: The inverse demand elasticity increases in xi:âĎp(xi)
âxi> 0
⢠Proposition 1: More productive firms charge higher markups and have a lower labor share.Consumers Side Markups and Labor Share Firms Side
14 / 26
Motivation Data and Stylized Facts Theory Empirical Framework Results Conclusion
Market Size Increase and Reallocation
⢠Market size increase:dΠdL
LÎ
=âÎ âL
LΠ︸ ︡︡ ︸
+︸ ︡︡ ︸Market size effect
+âÎ âÎť
Îť
Π︸ ︡︡ ︸â
Ă dÎť
dLLΝ︸ ︡︡ ︸
+︸ ︡︡ ︸Competition effect
(2)
⢠With additively separable preferences:
dÎ dL
LÎ
{> 0 for larger firms< 0 for smaller firms
(3)
⢠Proposition 2: A market size increase drives the labor share down through a reallocation of outputtowards large, low-labor share firms.
15 / 26
Motivation Data and Stylized Facts Theory Empirical Framework Results Conclusion
Implications for Markups
⢠Reallocation and aggregate markups (De Loecker et al., 2018; De Loecker and Eeckhout, 2018)
⢠Firm-level markups should decrease and within-firm labor share should increase
16 / 26
Motivation Data and Stylized Facts Theory Empirical Framework Results Conclusion
Testing for Reallocation
⢠Foreign demand growth =â superstar exporters grow disproportionately more?
⢠Value-added: appropriate measure of firm growth given labor share definition
LSt = âi
Ďit︸︡︡︸Value-added weight
LSit
17 / 26
Motivation Data and Stylized Facts Theory Empirical Framework Results Conclusion
Econometric Specification (Between-Exporter Effect)
⢠Estimate the following specification in first-differences:
â ln VAit =ÎąRankâDemandit + βRankâDemandit Ă Superstarit0
+ ÎłRankSuperstarit0+ âδkt + âĎit
(4)
â VAit: value-added of a firm i in year t
â Demandit: growth rate of foreign demand
â Superstarit0: internationalization measure
â âδkt: industry-year fixed effects
18 / 26
Motivation Data and Stylized Facts Theory Empirical Framework Results Conclusion
Econometric Specification (Within-Exporter Effect)
⢠Estimate the following specification in first-differences:
âLSit =ÎśRankâDemandit + ĎRankâDemandit Ă Superstarit0
+ ĎRankSuperstarit0+ âδkt + âĎ it
(5)
â LSit: labor share of a firm i in year t
â Demandit: growth rate of foreign demand
â Superstarit0: internationalization measure
â âδkt: industry-year fixed effects
19 / 26
Motivation Data and Stylized Facts Theory Empirical Framework Results Conclusion
Identification: Shift-Share Measure
⢠Destination country jâs total imports of product p (HS 6 level):
Mjpt = âlâL\{France}
Xljpt (6)
⢠Firm-level foreign demand measure:
âĚForeignDemandit = âj,p
Xijpt0
Xit0︸ ︡︡ ︸Share
Mjpt âMjptâ112 (Mjpt + Mjptâ1)︸ ︡︡ ︸
Shift
(7)
⢠French exports are purged from (6)
⢠Shares are plausibly exogenous
20 / 26
Motivation Data and Stylized Facts Theory Empirical Framework Results Conclusion
Superstar Exporters Grow Disproportionately More
-.02
0
.02
.04
.06
.08
VA G
row
th to
For
eign
Dem
and
Gro
wth
Ela
stic
ity
1 10 20 30 40 50 60 70 80 90 99Percentiles of Log Export Sales
Estimates Average Asian Crisis Russian Crisis Performance Plot Export Intensity Plot Export Sales21 / 26
Motivation Data and Stylized Facts Theory Empirical Framework Results Conclusion
Superstar Exportersâ Labor Share Decreases More
-2
-1.5
-1
-.5
0
.5
Labo
r Sha
re C
hang
e to
For
eign
Dem
and
Gro
wth
Ela
stic
ity
1 10 20 30 40 50 60 70 80 90 99Percentiles of Log Export Sales
Average22 / 26
Motivation Data and Stylized Facts Theory Empirical Framework Results Conclusion
Robustness
⢠Controlling for domestic sales and offshoring Go
⢠Future demand shocks and pre-trends Go
⢠Exclusion of extreme years Go
⢠Exclusion of key industries Go
⢠Alternative firm size measures Go
⢠Alternative lag structure Go
⢠Sample of survivors Go
⢠Outsourcing Go
⢠Alternative time period Go
23 / 26
Motivation Data and Stylized Facts Theory Empirical Framework Results Conclusion
Quantification Results
⢠Use estimates to compute predicted change in manufacturing labor share arising from foreigndemand growth
â Predicted changes within and between firms
⢠Foreign demand growth explains 3% of observed reallocation towards low-labor shareexporters
⢠Within and between firm effects predict a 0.5 pp drop in manufacturing labor share over1994-2001
⢠This accounts for 12% of observed labor share declineMagnitude Quantification Contribution Between Overall Contribution
24 / 26
Motivation Data and Stylized Facts Theory Empirical Framework Results Conclusion
Taking Stock
⢠Foreign demand growth drives manufacturing labor share down
1 Negative within-firm effect
2 Reallocation towards superstar exporters
⢠Overall effect of trade globalization
â International trade and innovation (Bloom et al., 2016; Aghion et al., 2018)
⢠Concentration versus competition (Syverson, 2004; Autor et al., 2017; Gutierrez andPhilippon, 2018)
25 / 26
Motivation Data and Stylized Facts Theory Empirical Framework Results Conclusion
Thank You!
26 / 26
Appendix
1 / 49
Sample Selection
⢠Keep manufacturing firms over 1994-2001
⢠Cleaning: keep firm-year observations with > 0 sales, value added, expenditures onmaterials, capital and > 1 employee. Drop observations that report <= 0 compensations onemployees and for which the labor share is < 0 or > 1. Capital built using the perpetualinventory method. All relevant variables are deflated by two-digit industry indexes
⢠Only keep firms exporting at least once
⢠For each sector, trim observations whose growth rate of sales is in top and bottom 1%
⢠Final sample: 73% of value-added of raw manufacturing sampleBack
2 / 49
Period of Analysis
⢠Why focus on 1994-2001?
1 No access to data before 1994
2 Definition of firm changes as of 2001
â Keep a consistent sample of firms before 2001
⢠Benefit: highlight role of export side of trade
â Stable import shares from key countries (China, Eastern-European countries, Low Wage countries)
Back
3 / 49
Labor Share Definition
⢠Labor share of firm i in year t is:
LSit :=wLitVAit
(8)
â Numerator: wages and employer contributions to pension and insurance funds and socialinsurance
â Denominator: nominal gross value-added
⢠Manufacturing labor share:
LSt =âi wLit
VAt= â
iĎit︸︡︡︸
Value-added weight
LSit (9)
4 / 49
Summary Statistics Main Sample
Mean Standard Deviation Median(1) (2) (3)
â Labor share 0.19 11 0â ln Export sales 0.1 1.1 0.07âĚ Foreign demand 0.04 0.3 0.03â ln Value-added 0.05 0.3 0.04â ln Labor compensation 0.05 0.2 0.04â Export-intensity 0.7 11.6 0â ln # Products exported 0.05 0.5 0â ln # Destinations served 0.04 0.4 0
# Firms 58,439# Observations 223,622# Survivors (1994-2001) 9,000
5 / 49
Sectoral French Exports to the Rest of the World by Industry
0
20
40
60
US
$ (b
illio
n)
1994
1995
1996
1997
1998
1999
2000
2001
Year
Food, beverages and tobacco
0
20
40
60
US
$ (b
illio
n)
1994
1995
1996
1997
1998
1999
2000
2001
Year
Textiles, leather and footwear
0
20
40
60
US
$ (b
illio
n)
1994
1995
1996
1997
1998
1999
2000
2001
Year
Wood except furniture
0
20
40
60
US
$ (b
illio
n)
1994
1995
1996
1997
1998
1999
2000
2001
Year
Pulp, paper, publish. and print.
0
20
40
60
US
$ (b
illio
n)
1994
1995
1996
1997
1998
1999
2000
2001
Year
Chemical, rubber, plastics, fuel
0
20
40
60
US
$ (b
illio
n)
1994
1995
1996
1997
1998
1999
2000
2001
Year
Other non-metallic mineral prod.
Exports
6 / 49
Sectoral French Exports to the Rest of the World by Industry
0
20
40
60
80
US
$ (b
illio
n)
1994
1995
1996
1997
1998
1999
2000
2001
Year
Metals and fabric. metal prod.
0
20
40
60
80
US
$ (b
illio
n)
1994
1995
1996
1997
1998
1999
2000
2001
Year
Machinery n.e.c
0
20
40
60
80
US
$ (b
illio
n)
1994
1995
1996
1997
1998
1999
2000
2001
Year
Electrical and optical equipment
0
20
40
60
80
US
$ (b
illio
n)
1994
1995
1996
1997
1998
1999
2000
2001
Year
Transport equipment
0
20
40
60
80
US
$ (b
illio
n)
1994
1995
1996
1997
1998
1999
2000
2001
Year
Manufacturing n.e.c, recycling
Exports
7 / 49
Manufacturing Labor Share (Macro Data) Back
60
62
64
66
68
Lab
or S
hare
(in
%)
1994 1995 1996 1997 1998 1999 2000 2001 Year
8 / 49
Manufacturing Labor Share of Domestic Firms Back
66
67
68
69
70
71
Labo
r Sha
re (i
n %
)
1994 1995 1996 1997 1998 1999 2000 2001Year
9 / 49
Manufacturing Labor Share by Country Back
50
60
70
80
1994
1996
1998
2000
2002
2004
2006
Year
Austria
50
60
70
80
1994
1996
1998
2000
2002
2004
2006
Year
Belgium
50
60
70
80
1994
1996
1998
2000
2002
2004
2006
Year
Germany
50
60
70
80
1994
1996
1998
2000
2002
2004
2006
Year
Finland
50
60
70
80
1994
1996
1998
2000
2002
2004
2006
Year
France
50
60
70
80
1994
1996
1998
2000
2002
2004
2006
Year
Italy
50
60
70
80
1994
1996
1998
2000
2002
2004
2006
Year
Japan
50
60
70
80
1994
1996
1998
2000
2002
2004
2006
Year
Netherlands
50
60
70
80
1994
1996
1998
2000
2002
2004
2006
Year
Spain
50
60
70
80
1994
1996
1998
2000
2002
2004
2006
Year
Sweden
50
60
70
80
1994
1996
1998
2000
2002
2004
2006
Year
UK
50
60
70
80
1994
1996
1998
2000
2002
2004
2006
Year
USA
10 / 49
Within/Between-Sector Decomposition Back
-4
-2
0
2
Cum
ulat
ive
Cha
nge
1994 1995 1996 1997 1998 1999 2000 2001Year
Aggregate Change
Within-Sector Effect
Between-Sector Effect
11 / 49
Chinese, LWC and Eastern European Import SharesIdentification
0
1
2
3
4
5
6
7
8
Impo
rt S
hare
(%)
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Year
China Other LWC Eastern Europe
12 / 49
Exports to GDP Ratio
22
24
26
28
30
Exp
orts
of g
oods
and
ser
vice
s (%
of G
DP)
1994 1995 1996 1997 1998 1999 2000 2001Year
Exports13 / 49
Choice of Decomposition Method
⢠Several decomposition methods: Baily et al. (1992); Griliches and Regev (1995); Foster et al.(2001); Melitz and Polanec (2015)
⢠Baily et al. (1992): contribution of entrants is always positive and that of exiters negative
â Contribution of entrants/exiters depends on difference between their labor share and a referencelabor share level (GR, FHK, MP)
⢠Use FHK decomposition
⢠Robust to MP decompositionBack
14 / 49
FHK Decomposition
⢠LStâ1: aggregate labor share in tâ 1 (reference labor share level)
âLSt =âiâS
Ďitâ1(LSit â LSitâ1
)︸ ︡︡ ︸
Within
+ âiâS
(Ďit âĎitâ1
)(LSitâ1 â LStâ1
)︸ ︡︡ ︸
Between
+ âiâS
(Ďit âĎitâ1
)(LSit â LSitâ1
)︸ ︡︡ ︸
Cross
+ âiâENT
Ďit(LSit â LStâ1
)︸ ︡︡ ︸
Entry
â âiâEXT
Ďitâ1(LSitâ1 â LStâ1
)︸ ︡︡ ︸
Exit
(10)
Back
15 / 49
Melitz-Polanec Decomposition
⢠LSt: unweighted mean labor share
⢠Ďt: unweighted value-added share
⢠âĚXit = Xit âXt
⢠Olley-Pakes (1996) decomposition:
LSt â LStâ1 =
(LSt â LStâ1
)+
(â
iâĚĎitâĚLSit ââ
iâĚĎitâ1âĚLSitâ1
)(11)
⢠Melitz-Polanec decomposition (with entry-exit):
âLSt = âLSSt︸ ︡︡ ︸
Within
+ â(
âi
âĚĎitâĚLSit
)S
︸ ︡︡ ︸Between
+ ĎENTt
(LSENT
t â LSSt
)︸ ︡︡ ︸
Entry
+ĎEXTtâ1
(LSS
tâ1 â LSEXTtâ1
)︸ ︡︡ ︸
Exit
(12)
Back
16 / 49
FHK Decomposition of Manufacturing Labor Share
Total Change Within Between Entry-Exit(1) (2) (3) (4)
1994-1995 -3.12 -0.05 -0.57 -2.51995-1996 1.39 1.83 -0.9 0.461996-1997 -0.85 -0.62 -0.6 0.371997-1998 -0.47 0.11 -0.37 -0.21998-1999 -0.6 0.45 -1.04 -0.0061999-2000 -1.37 -0.27 -0.51 -0.592000-2001 1.05 1.62 -0.009 -0.56
1994-2001 -3.97 3.06 -4 -3.031994-2000 -5.02 1.44 -3.99 -2.47
Back
17 / 49
FHK Decomposition of Labor Share Changes on Whole Sample
Total Change Within Between Entry-Exit(1) (2) (3) (4)
1994-1995 -1.13 0.02 -0.92 -0.231995-1996 0.62 1.61 -0.81 -0.191996-1997 -0.98 -0.53 -0.45 -0.0021997-1998 -0.75 0.01 -0.41 -0.351998-1999 -0.61 0.20 -0.82 0.0071999-2000 -1.67 -0.91 -0.25 -0.512000-2001 1.57 1.56 0.008 -0.0001
1994-2001 -2.96 1.96 -3.65 -1.271994-2000 -4.53 0.40 -3.66 -1.27
Back
18 / 49
MP Decomposition of Labor Share Changes
Total Change Within Between Entry-Exit(1) (2) (3) (4)
1994-1995 -3.12 0.24 -1.05 -2.311995-1996 1.39 1.18 -0.18 0.381996-1997 -0.85 -0.32 -1 0.481997-1998 -0.47 -0.18 -0.12 -0.171998-1999 -0.6 0.32 -0.98 0.061999-2000 -1.37 -0.4 -0.45 -0.522000-2001 1.05 0.82 0.98 -0.76
1994-2001 -3.97 1.67 -2.8 -2.841994-2000 -5.02 0.85 -3.79 -2.08
Back
19 / 49
MP Decomposition of Labor Share Changes on Whole Sample
Total Change Within Between Entry-Exit(1) (2) (3) (4)
1994-1995 -1.13 0.76 -1.74 -0.151995-1996 0.62 1.29 -0.43 -0.241996-1997 -0.98 0.49 -1.54 0.061997-1998 -0.75 0.24 -0.64 -0.351998-1999 -0.61 0.41 -1.09 0.071999-2000 -1.67 -0.18 -1.07 -0.412000-2001 1.57 0.62 1.12 -0.18
1994-2001 -2.96 3.63 -5.38 -1.21994-2000 -4.53 3 -6.51 -1.02
Back
20 / 49
Internationalization and Labor Share: Regression Analysis Back
Dependent variable Labor Share(1) (2) (3) (4) (5) (6)
Export intensity -3.92*** -2.9*** -1.82***(0.33) (0.34) (0.33)
ln Export sales -0.54*** -0.54*** -0.11***(0.03) (0.09) (0.03)
ln # Products exported -0.17*** 0.20*** 0.70***(0.06) (0.07) (0.07)
ln # Destinations served -0.25*** 0.28*** 0.99***(0.08) (0.10) (0.09)
ln Total sales -9.68***(0.19)
Two-digit Sector Ă Year FE X X X X X XFirm FE X X X X X X
# Observations 207,153 207,153 207,153 207,153 207,153 207,15321 / 49
Internationalization and Labor Share across Groups Back
22 / 49
Consumers Side Back
⢠Build on Zhelobodko et al. (2012). L consumers and preferences are additively separable.Consumers solve:
maxxi
⍠N
0u(xi)di s.t.
⍠N
0pixidi = 1
â xi: per-consumer quantity of variety i
â pi: price
â uâ˛(xi) > 0 and uâ˛â˛(xi) < 0
⢠Inverse demand function:
p(xi; Îť) =uâ˛(xi)
Îť(13)
⢠Marginal utility of income:
Ν =⍠N
0uâ˛(xi)xidi (14)
23 / 49
Consumers Side Back
⢠Build on Zhelobodko et al. (2012). L consumers and preferences are additively separable.Consumers solve:
maxxi
⍠N
0u(xi)di s.t.
⍠N
0pixidi = 1
â xi: per-consumer quantity of variety i
â pi: price
â uâ˛(xi) > 0 and uâ˛â˛(xi) < 0
⢠Inverse demand function:
p(xi; Îť) =uâ˛(xi)
Îť(13)
⢠Marginal utility of income:
Ν =⍠N
0uâ˛(xi)xidi (14)
23 / 49
Labor Share and Markups Back
⢠Production function linear in labor l: qi = Ďli where productivity Ď varies across firms
⢠Profit maximization entails marginal revenue = marginal cost:
pi︸︡︡︸price
= ¾i︸︡︡︸markup
Ă wĎ︸︡︡︸
marginal cost
(15)
or rearranging:wlipiqi︸︡︡︸
labor share
=1Âľi
(16)
24 / 49
Firms Side Back
⢠Monopolistic competition with firm heterogeneity similar to Melitz (2003)
⢠Per-consumer operating profits Ďc:
Ďc(Ď, Îť) := maxxi
{(uâ˛(xi)
Îťâ 1
Ď
)xi
}(17)
⢠Total net profits are given by:Î (Ď, Îť) = Ďc(Ď, Îť)Lâ f (18)
⢠Cutoff productivity level Ďâ that solves:
Î (Ďâ, Îť) = 0ââ Ďc(Ďâ, Îť)L = f (19)
⢠Free entry: ⍠â
Ďâ
[Ďc(Ď, Îť)Lâ f
]dG(Ď) = fe (20)
25 / 49
Direction of the Reverse Causality Bias
⢠Model without interaction terms:
â ln VAit = Îşâ ln EXPORTSit + âÎľit
â ln EXPORTSit = δâ ln VAit + âΡit
⢠Solving the system and given that ÎşĚOLS =Cov(
â ln EXPORTSit,â ln VAit
)Var(â ln EXPORTSit)
:
sgn{
ÎşĚOLS â Îş
}= sgn
{1â κδ
}(21)
⢠Expect: Îş â (0, 1) and δ â (0, 1) =âupward biased OLS coefficient :
ÎşĚOLS > Îş
26 / 49
Heterogeneous Effect on Value-Added Growth and Labor Share
Dependent variable â ln VAit âLSit
Internationalization Measure (Superstar) Export Intensity ln Export Sales Export Intensity ln Export Sales(1) (2) (3) (4)
âĚForeignDemandit -0.0116** -0.0160*** 0.0979 0.1855(0.0045) (0.0040) (0.1995) (0.1793)
âĚForeignDemandit Ă Superstarit00.0114*** 0.0068*** -0.2404** -0.1461***(0.0025) (0.0010) (0.1124) (0.0461)
Superstarit0-0.0054*** -0.0061*** 0.0583*** 0.0207***(0.0006) (0.0002) (0.0181) (0.0080)
Two-digit Sector Ă Year FE X X X X
# Observations 164,807 164,807 164,807 164,807
Back
27 / 49
Reallocation towards more Internationalized Firms
Dependent variable â ln VAit
Internationalization Measure ( ËSuperstar) Export Intensity ln Export Sales ln # Products Exported ln # Destinations Served(1) (2) (3) (4)
âĚForeignDemandit 0.0115*** 0.0148*** 0.0100*** 0.0116***(0.0026) (0.0027) (0.0024) (0.0025)
âĚForeignDemandit Ă ËSuperstaritâ1 0.0718*** 0.0067*** 0.0063*** 0.0099***(0.0140) (0.0010) (0.0020) (0.0025)
ËSuperstaritâ1 -0.0246*** -0.0055*** -0.0100*** -0.0128***(0.0030) (0.0002) (0.0005) (0.0006)
Two-digit Sector Ă Year FE X X X X
# Observations 164,807 164,807 164,807 164,807
Back
28 / 49
Foreign Demand and Labor Share within Firms
Dependent variable âLabor Shareit
Internationalization Measure ( ËSuperstar) Export Intensity ln Export Sales ln # Products Exported ln # Destinations Served
(1) (2) (3) (4) (5) (6) (7) (8)
âĚForeignDemandit -0.3617*** -0.3821*** -0.4896*** -0.4737*** -0.4562*** -0.4565*** -0.4726*** -0.4854***(0.1166) (0.0074) (0.1209) (0.1384) (0.1113) (0.1284) (0.1143) (0.1309)
âĚForeignDemandit Ă ËSuperstaritâ1 -0.0111* -0.0125* -0.1589*** -0.1628*** -0.3327*** -0.3809*** -0.3894*** -0.4784***(0.0063) (0.0074) (0.0450) (0.0549) (0.0871) (0.1028) (0.1079) (0.1280)
ËSuperstaritâ1 0.0068*** 0.0394*** 0.0558*** 0.4998*** 0.0329* 0.3539*** 0.0192 0.3565***(0.0010) (0.0041) (0.0085) (0.0386) (0.0172) (0.0796) (0.0200) (0.1020)
Two-digit Sector Ă Year FE X X X X X X X XFirm FE X X X X
# Observations 164,807 156,302 164,807 156,302 164,807 156,302 164,807 156,302
Back
29 / 49
Asian Financial Crisis Back
Asian Financial Crisis
90
100
110
120
Valu
e-A
dded
(Ind
ex =
100
in 1
996)
1996 1997 1998 1999 2000 2001Year
Exposure = 0 Exposure > 10% Exposure > 20%
30 / 49
Russian Financial Crisis Back
Russian Financial Crisis
90
100
110
120
130
140
Valu
e-A
dded
(Ind
ex =
100
in 1
997)
1997 1998 1999 2000 2001Year
Exposure = 0 Exposure > 10% Exposure > 20%
31 / 49
Effect on Investment and Number of Employees Back
Dependent variable â ln Tangible Inv.it â ln Inv.it â ln Capital-Labor Ratioit â ln Employeesit â ln Wagesit â ln Dividendsit(1) (2) (3) (4) (5) (6)
âĚForeignDemandit 0.0238 0.0248 0.0015 -0.0003 -0.0006 0.0090(0.0163) (0.0163) (0.0043) (0.0028) (0.0026) (0.0195)
âĚForeignDemandit Ă ËExport Intensityitâ1 0.1443* 0.1469** 0.0135 0.0107 0.0242* 0.2181**(0.0749) (0.0742) (0.0204) (0.0135) (0.0125) (0.1022)
ËExport Intensityitâ1 -0.0882* -0.0441 -0.0258* -0.0376*** -0.0140* 0.0707(0.0459) (0.0463) (0.0145) (0.0092) (0.0084) (0.0595)
Two-digit Sector Ă Year FE X X X X X XFirm FE X X X X X X
# Observations 136,802 136,802 156,302 156,302 156,302 35,977
32 / 49
Elasticity of Firm Characteristics to Foreign Demand Shock Back
-.1
0
.1
.2
.3
Ela
stic
ity
[0, 0.05] [0.05, 0.2] [0.2, 0.5] [0.5, 0.7] [0.7, 0.8] [0.8, 1] Export Intensity
Tangible Investment
-.1
0
.1
.2
.3
[0, 0.05] [0.05, 0.2] [0.2, 0.5] [0.5, 0.7] [0.7, 0.8] [0.8, 1] Export Intensity
Total Investment
-.02
0
.02
.04
.06 E
last
icity
[0, 0.05] [0.05, 0.2] [0.2, 0.5] [0.5, 0.7] [0.7, 0.8] [0.8, 1] Export Intensity
Capital-Labor Ratio
-.02-.01
0.01.02.03
[0, 0.05] [0.05, 0.2] [0.2, 0.5] [0.5, 0.7] [0.7, 0.8] [0.8, 1] Export Intensity
Workers
-.01
0
.01
.02
.03
Ela
stic
ity
[0, 0.05] [0.05, 0.2] [0.2, 0.5] [0.5, 0.7] [0.7, 0.8] [0.8, 1] Export Intensity
Wages
-.10.1.2.3.4
[0, 0.05] [0.05, 0.2] [0.2, 0.5] [0.5, 0.7] [0.7, 0.8] [0.8, 1] Export Intensity
Dividends
33 / 49
Elasticity of Firm Characteristics to Foreign Demand Shock Back
-.05
0
.05
.1
.15
Ela
stic
ity
1 10 20 30 40 50 60 70 80 90 99 Percentiles of Log Export Sales
Tangible Investment
-.05
0
.05
.1
.15
1 10 20 30 40 50 60 70 80 90 99 Percentiles of Log Export Sales
Total Investment
-.02
0
.02
.04 E
last
icity
1 10 20 30 40 50 60 70 80 90 99 Percentiles of Log Export Sales
Capital-Labor Ratio
-.02
-.01
0
.01
1 10 20 30 40 50 60 70 80 90 99 Percentiles of Log Export Sales
Workers
-.02
0
.02
.04
Ela
stic
ity
1 10 20 30 40 50 60 70 80 90 99 Percentiles of Log Export Sales
Wages
-.1
0
.1
.2
1 10 20 30 40 50 60 70 80 90 99 Percentiles of Log Export Sales
Dividends
34 / 49
Robustness: Reallocation with Controls Back
Dependent variable â ln VAitInternationalization Measure ( ËINT) Export Intensity ln Export Sales ln # Products Exported ln # Destinations Served
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)
âĚForeignDemandit 0.0087*** 0.0081*** 0.0059** 0.0121*** 0.0114*** 0.0085*** 0.0083*** 0.0077*** 0.0053** 0.0100*** 0.0094*** 0.0065***(0.0027) (0.0027) (0.0028) (0.0025) (0.0025) (0.0027) (0.0022) (0.0022) (0.0024) (0.0023) (0.0023) (0.0025)
âĚForeignDemandit Ă ËSuperstaritâ1 0.0572*** 0.0550** 0.0587** 0.0054*** 0.0052*** 0.0053*** 0.0055*** 0.0052*** 0.0052** 0.0092*** 0.0089*** 0.0086***(0.0181) (0.0180) (0.0192) (0.0010) (0.0010) (0.0011) (0.0018) (0.0018) (0.0021) (0.0022) (0.0022) (0.0026)
ËSuperstaritâ1 -0.0781*** -0.0766*** -0.5316*** -0.0044*** -0.0043*** -0.0195*** -0.0084*** -0.0073*** -0.0215*** -0.0102*** -0.0092*** -0.0276***(0.0033) (0.0033) (0.0146) (0.0002) (0.0002) (0.0009) (0.0004) (0.0004) (0.0018) (0.0005) (0.0005) (0.0023)
â ln (1+Domestic Sales)it 0.2867*** 0.2823*** 0.2820*** 0.2808*** 0.2765*** 0.2318*** 0.2811*** 0.2769*** 0.2323*** 0.2808*** 0.2767*** 0.2324***(0.0085) (0.0084) (0.0098) (0.0084) (0.0083) (0.0083) (0.0084) (0.0083) (0.0083) (0.0084) (0.0083) (0.0083)
â ln (1+Imports)it 0.0148*** 0.0080*** 0.0149*** 0.0084*** 0.0145*** 0.0077*** 0.0146*** 0.0078***(0.0007) (0.0006) (0.0006) (0.0007) (0.0006) (0.0007) (0.0007) (0.0007)
Two-digit Sector Ă Year FE X X X X X X X X X X X XFirm FE X X X X
# Observations 164,807 164,807 156,302 164,807 164,807 156,302 164,807 164,807 156,302 164,807 164,807 156,302
35 / 49
Robustness: Future Demand Shocks Back
Dependent variable â ln VAit
Internationalization Measure ( ËSuperstar) Export Intensity ln Export Sales ln # Products Exported ln # Destinations Served
(1) (2) (3) (4) (5) (6) (7) (8)
âĚForeignDemandit 0.0134*** 0.0153*** 0.0119*** 0.0137***(0.0034) (0.0036) (0.0034) (0.0034)
âĚForeignDemandit Ă ËSuperstaritâ1 0.0103*** 0.0054*** 0.0043 0.0109***(0.0040) (0.0017) (0.0032) (0.0040)
âĚForeignDemandit+1 -0.0000 0.0013 0.0007 -0.0000(0.0034) (0.0037) (0.0034) (0.0034)
âĚForeignDemandit+1 Ă ËSuperstaritâ1 -0.0018 0.0013 0.0008 -0.0015(0.0041) (0.0016) (0.0032) (0.0040)
ËSuperstaritâ1 -0.0346*** -0.0349*** -0.0117*** -0.0117*** -0.0110*** -0.0110*** -0.0165*** -0.0162***(0.0120) (0.0120) (0.0011) (0.0011) (0.0022) (0.0022) (0.0028) (0.0028)
Two-digit Sector Ă Year FE X X X X X X X XFirm FE X X X X X X X X
# Observations 84,699 84,699 84,699 84,699 84,699 84,699 84,699 84,699
36 / 49
Robustness: Period 1995-2000 Back
Dependent variable â ln VAit
Internationalization Measure ( ËSuperstar) Export Intensity ln Export Sales ln # Products Exported ln # Destinations Served(1) (2) (3) (4)
âĚForeignDemandit 0.0115*** 0.0134*** 0.0098*** 0.0110***(0.0033) (0.0034) (0.0031) (0.0032)
âĚForeignDemandit Ă ËSuperstaritâ1 0.0568*** 0.0057*** 0.0049* 0.0087**(0.0189) (0.0015) (0.0028) (0.0036)
ËSuperstaritâ1 -0.1061*** -0.0206*** -0.0270*** -0.0324***(0.0128) (0.0012) (0.0025) (0.0032)
Two-digit Sector Ă Year FE X X X XFirm FE X X X X
# Observations 109,304 109,304 109,304 109,304
37 / 49
Robustness: Dropping Key Industries Back
Dependent variable â ln VAit
Internationalization Measure ( ËSuperstar) Export Intensity ln Export Sales ln # Products Exported ln # Destinations Served(1) (2) (3) (4)
âĚForeignDemandit 0.0066** 0.0090*** 0.0052* 0.0063**(0.0032) (0.0032) (0.0029) (0.0030)
âĚForeignDemandit Ă ËSuperstaritâ1 0.0642*** 0.0067*** 0.0067*** 0.0103***(0.0175) (0.0014) (0.0026) (0.0033)
ËSuperstaritâ1 -0.1154*** -0.0210*** -0.0293*** -0.0360***(0.0107) (0.0011) (0.0022) (0.0029)
Two-digit Sector Ă Year FE X X X XFirm FE X X X X
# Observations 115,796 115,796 115,796 115,796
38 / 49
Robustness: Other Measures of Firm Size Back
Dependent variable â ln VAitFirm Size Measure ( ËLARGE) Log Total Sales Capital-Labor Ratio
(1) (2) (3) (4)
âĚForeignDemandit 0.0047* 0.0041 0.0042 0.0036
âĚForeignDemandit Ă ËLARGEit0 0.0043* 0.0040* 0.0072** 0.0072**
â ln (1+Imports)it 0.0136*** 0.0136***(0.0007) (0.0007)
Two-digit Sector Ă Year FE X X X XFirm FE X X X X
# Observations 156,302 156,302 156,302 156,302
39 / 49
Robustness: Two Year Lag Interaction Back
Dependent variable â ln VAit
Internationalization Measure ( ËSuperstar) Export Intensity ln Export Sales ln # Products Exported ln # Destinations Served(1) (2) (3) (4)
âĚForeignDemandit 0.0128*** 0.0159*** 0.0124*** 0.0140***(0.0033) (0.0033) (0.0030) (0.0031)
âĚForeignDemandit Ă ËSuperstaritâ2 0.0429** 0.0057*** 0.0055** 0.0113***(0.0188) (0.0015) (0.0027) (0.0034)
ËSuperstaritâ2 -0.0556*** -0.0140*** -0.0148*** -0.0221***(0.0097) (0.0009) (0.0019) (0.0024)
Two-digit Sector Ă Year FE X X X XFirm FE X X X X
# Observations 116,817 116,817 116,817 116,817
40 / 49
Robustness: Sample of Survivors Back
Dependent variable â ln VAit
Internationalization Measure ( ËSuperstar) Export Intensity ln Export Sales ln # Products Exported ln # Destinations Served(1) (2) (3) (4)
âĚForeignDemandit 0.0100*** 0.0087** 0.0085** 0.0086**(0.0038) (0.0037) (0.0037) (0.0037)
âĚForeignDemandit Ă ËSuperstaritâ1 0.0512** 0.0074*** 0.0078*** 0.0094**(0.0205) (0.0017) (0.0030) (0.0038)
ËSuperstaritâ1 -0.0627*** - 0.0151*** -0.0152*** -0.0198***(0.0105) (0.0012) (0.0022) (0.0029)
Two-digit Sector Ă Year FE X X X XFirm FE X X X X
# Observations 62,986 62,986 62,986 62,986
41 / 49
Robustness: Trim Top and Bottom 10% of Employment andInvestment Distribution Back
Dependent variable â ln VAit
Internationalization Measure ( ËSuperstar) Export Intensity ln Export Sales ln # Products Exported ln # Destinations Served(1) (2) (3) (4)
âĚForeignDemandit 0.0080*** 0.0103*** 0.0070** 0.0078***(0.0031) (0.0031) (0.0028) (0.0029)
âĚForeignDemandit Ă ËSuperstaritâ1 0.0552*** 0.0066*** 0.0077*** 0.0105***(0.0181) (0.0013) (0.0024) (0.0029)
ËSuperstaritâ1 -0.0969*** -0.0161*** -0.0192*** -0.0207***(0.0103) (0.0010) (0.0020) (0.0025)
Two-digit Sector Ă Year FE X X X XFirm FE X X X X
# Observations 100,786 100,786 100,786 100,786
42 / 49
Robustness: Alternative Time Period Back
Dependent variable â ln VAitTime Period 1994-2007 2001-2007
Internationalization Measure ( ËSuperstar) Export Intensity ln Export Sales ln # Products Exported ln # Destinations Served Export Intensity ln Export Sales ln # Products Exported ln # Destinations Served(1) (2) (3) (4) (5) (6) (7) (8)
âĚForeignDemandit 0.0101*** 0.0132*** 0.0096*** 0.0104*** 0.0114*** 0.0145*** 0.0111*** 0.0116***(0.0021) (0.0021) (0.0019) (0.0019) (0.0029) (0.0029) (0.0027) (0.0027)
âĚForeignDemandit Ă ËSuperstaritâ1 0.0467*** 0.0058*** 0.0059*** 0.0082*** 0.0430*** 0.0057*** 0.0060*** 0.0078***(0.0106) (0.0008) (0.0016) (0.0020) (0.0147) (0.0011) (0.0022) (0.0028)
ËSuperstaritâ1 -0.1080*** -0.0226*** -0.0358*** -0.0476*** -0.1103*** -0.0267*** -0.0443*** -0.0586***(0.0064) (0.0006) (0.0013) (0.0017) (0.0111) (0.0011) (0.0022) (0.0029)
Two-digit Sector Ă Year FE X X X X X X X XFirm FE X X X X X X X X
# Observations 294,173 294,173 294,173 294,173 155,676 155,676 155,676 155,676
43 / 49
Magnitude of the Effect Back
⢠Use Foster et al. (2001) decomposition to measure contribution of export globalization toreallocation effect. Between-firm effect is:
âLSBetweent := â
iâS
(Ďit âĎitâ1
)(LSitâ1 â LStâ1
)+ â
iâS
(Ďit âĎitâ1
)(LSit â LSitâ1
)(22)
⢠Change in between term effect due to foreign demand growth:
âLĚSBetweent = â
iâS
(ĎĚBetween
it âĎitâ1)(
LSitâ1 â LStâ1)
+ âiâS
(ĎĚBetween
it âĎitâ1)(
ÎśĚâForeignDemandit + ĎĚâForeignDemandit Ă ËSuperstaritâ1
) (23)
⢠Predicted weights:
ĎĚBetweenit =
VAitâ1
(1 + ÎąĚâForeignDemandit + βĚâForeignDemandit Ă ËSuperstaritâ1
)âi VAitâ1
(1 + ÎąĚâForeignDemandit + βĚâForeignDemandit Ă ËSuperstaritâ1
)(24)
44 / 49
Magnitude of the Effect Back
⢠Use Foster et al. (2001) decomposition to measure contribution of export globalization toreallocation effect. Between-firm effect is:
âLSBetweent := â
iâS
(Ďit âĎitâ1
)(LSitâ1 â LStâ1
)+ â
iâS
(Ďit âĎitâ1
)(LSit â LSitâ1
)(22)
⢠Change in between term effect due to foreign demand growth:
âLĚSBetweent = â
iâS
(ĎĚBetween
it âĎitâ1)(
LSitâ1 â LStâ1)
+ âiâS
(ĎĚBetween
it âĎitâ1)(
ÎśĚâForeignDemandit + ĎĚâForeignDemandit Ă ËSuperstaritâ1
) (23)
⢠Predicted weights:
ĎĚBetweenit =
VAitâ1
(1 + ÎąĚâForeignDemandit + βĚâForeignDemandit Ă ËSuperstaritâ1
)âi VAitâ1
(1 + ÎąĚâForeignDemandit + βĚâForeignDemandit Ă ËSuperstaritâ1
)(24)
44 / 49
Magnitude of the Effect Back
⢠Use Foster et al. (2001) decomposition to measure contribution of export globalization toreallocation effect. Between-firm effect is:
âLSBetweent := â
iâS
(Ďit âĎitâ1
)(LSitâ1 â LStâ1
)+ â
iâS
(Ďit âĎitâ1
)(LSit â LSitâ1
)(22)
⢠Change in between term effect due to foreign demand growth:
âLĚSBetweent = â
iâS
(ĎĚBetween
it âĎitâ1)(
LSitâ1 â LStâ1)
+ âiâS
(ĎĚBetween
it âĎitâ1)(
ÎśĚâForeignDemandit + ĎĚâForeignDemandit Ă ËSuperstaritâ1
) (23)
⢠Predicted weights:
ĎĚBetweenit =
VAitâ1
(1 + ÎąĚâForeignDemandit + βĚâForeignDemandit Ă ËSuperstaritâ1
)âi VAitâ1
(1 + ÎąĚâForeignDemandit + βĚâForeignDemandit Ă ËSuperstaritâ1
)(24)
44 / 49
Quantifying the Effect of Foreign Demand Growth Back
⢠Within-firm effect:âLSWithin
t := âiâS
Ďitâ1(LSit â LSitâ1
)⢠The predicted within-firm effect is:
âLĚSWithint = â
iâSĎitâ1
(ÎśĚâForeignDemandit + ĎĚâForeignDemandit Ă ËSuperstaritâ1
)(25)
⢠Compute âLĚSBetweent and âLĚS
Withint for each year
45 / 49
Contribution of Foreign Demand to the Between-Firm Component
Internationalization Measure Export Intensity Export Sales
âLĚSBetweent Contribution (%) âLĚS
Betweent Contribution (%)
(1) (2) (3) (4)1994-1995 0.0011 -0.19 -0.0028 0.491995-1996 -0.0042 0.47 -0.0450 51996-1997 0.0015 -0.25 0.0141 -2.351997-1998 0.0101 -2.73 0.0663 -17.921998-1999 -0.0321 3.09 -0.0590 5.671999-2000 -0.0189 3.71 -0.1091 21.392000-2001 0.0108 -120 0.0264 -293.33
1994-2001 -0.0316 0.79 -0.1091 2.731994-2000 -0.0424 1.06 -0.1355 3.40
Back
46 / 49
Contribution of Foreign Demand to the Within-Firm Componentand Overall Effect
Internationalization Measure Export Intensity Export Sales
âLĚSWithint âLĚS
Withint + âLĚS
Betweent âLĚS
Withint âLĚS
Withint + âLĚS
Betweent
(1) (2) (3) (4)1994-1995 -0.0687 -0.0676 -0.1939 -0.19671995-1996 -0.0177 -0.0219 -0.0581 -0.10311996-1997 -0.0029 -0.0014 -0.0026 0.01151997-1998 -0.0115 -0.0014 -0.0315 0.03481998-1999 -0.0085 -0.0236 -0.0327 -0.09171999-2000 -0.0125 -0.0314 -0.0579 -0.1672000-2001 -0.0006 0.0102 0.0076 0.034
1994-2001 -0.1222 -0.1538 -0.3691 -0.47821994-2000 -0.1217 -0.1641 -0.3767 -0.5122
Back 47 / 49
Contribution of Foreign Demand to the Between-Firm Component(Alternative)
Internationalization Measure Export Intensity Export Sales
âLĚSBetweent Contribution (%) âLĚS
Betweent Contribution (%)
(1) (2) (3) (4)1994-1995 0.0082 -1.44 -0.0052 0.911995-1996 -0.0005 0.06 -0.0579 6.431996-1997 0.0058 -0.97 -0.0016 0.271997-1998 0.0062 -1.68 0.0833 -22.511998-1999 -0.0265 2.55 -0.0704 6.771999-2000 -0.0166 3.25 -0.1335 26.182000-2001 0.0065 -72.22 0.0311 -345.56
1994-2001 -0.0168 0.42 -0.1542 3.861994-2000 -0.0234 0.59 -0.1853 4.64
Back48 / 49
Magnitude of the Effects (Alternative)
Internationalization Measure Export Intensity Export Sales
âLĚSWithint âLĚS
Withint + LĚS
Betweent âLĚS
Withint âLĚS
Withint + âLĚS
Betweent
(1) (2) (3) (4)1994-1995 -0.0937 -0.0855 -0.2186 -0.22381995-1996 -0.0218 -0.0223 -0.0637 -0.12161996-1997 -0.0029 0.0029 -0.0114 -0.01301997-1998 -0.0267 -0.0205 -0.0294 0.05391998-1999 -0.0128 -0.0393 -0.0336 -0.10401999-2000 -0.0140 -0.0306 -0.0681 -0.20162000-2001 0.0004 0.0069 0.0071 0.0382
1994-2001 -0.1714 -0.1882 -0.4177 -0.57191994-2000 -0.1718 -0.1952 -0.4248 -0.6101
Back 49 / 49