Factor-Biased Efficiency Gains from Exporting: Evidence from Colombia

TL;DR

This paper investigates how exporting influences efficiency and input-specific productivity in Colombia's manufacturing sectors, revealing significant factor-biased gains especially in unskilled labor and machinery over a decade.

Contribution

It introduces a production function model capturing factor-biased technical changes within a dynamic export framework, using advanced methods to address measurement error and selection bias.

Findings

New exporters see 4% annual increase in labor-augmenting productivity.

Unskilled labor productivity grows by 8% annually, linked to machinery expansion.

Total factor productivity increases by 3% per year.

Abstract

This study examines whether exporting enhances efficiency and favors specific inputs. We develop a production function model within a dynamic exporting and investment framework, capturing factor-biased technical changes. Using Kalman filtering to address measurement error and propensity score matching to control for self-selection into exporting, we analyze Colombia's manufacturing sectors from 1981 to 1991. New exporters achieve a 4% annual increase in labor-augmenting and unskilled labor relative productivity, with no change in Hicks-neutral productivity. Unskilled labor-augmenting productivity grows by 8% annually, aligning with machinery asset expansion, while TFP rises by 3% per year.