Regional Variations in Exporters’ Productivity Premium: Theory and Evidence

The international trade literature confirms that the average productivity of exporters is higher than that of non-exporters, while economic geography studies establish that urban firms tend to be more productive than rural ones. By introducing region-specific transportation costs in a Melitz-type heterogeneous firm trade model, the theory predicts that the minimum threshold productivity level for export is higher but that for survival by serving the local market is lower in the periphery region than in the core. Using Japanese plant-level panel data, we find evidence supporting the theoretical prediction that exporters in the peripheral regions, especially those distant from the core, have large productivity premiums.