The Impact of Exporting: Evidence from a Randomized Experiment

Investigators: CDEP Faculty Affiliate Amit Khandelwal and co-authors David Atkin and Adam Osman, both of Yale University

This project aims to increase our understanding of the channels through which exporting can drive economic growth and reduce poverty. Many policymakers believe that export-oriented growth raises the performance of firms through a variety of channels, such as learning from buyers, the need to exert greater effort in competitive foreign markets and the ability to exploit economies of scale. This belief underscores many types of export-promotion policies across the world. However, if exporting enterprises self-select into export markets, it is unclear if such promotion policies are truly effective. Understanding whether only "good" firms export or whether exporting helps firms become "good" is difficult, because firms endogenously choose to export.

Using a randomized field experiment, we will try to establish the causal impact of providing Egyptian small-scale enterprises (SSEs) the opportunity to sell their products to foreign markets. In particular, our experimental design allows us to answer three related questions. First, by focusing on the carpet industry, where firm performance can be accurately measured, we can assess the causal impact of exposure to foreign markets by comparing outcomes between the treatment and control groups. The rich data allow us to understand the mechanisms through which changes occur: product mix, product quality, input choices, labor composition, investment, etc. Second, by using subgroup analysis, we can analyze the key firm-specific factors that are conducive for export success by exploring how treatment outcomes co-vary with firm characteristics. Third, we can explore the impact of export participation on welfare measures such as income, investments in child education and income/consumption volatility.