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We estimate the relationship between exporting and productivity using data on Israeli manufacturing firms from the years 1996-2003. We find that the total factor productivity of exporting firms in Israel is higher than that of non-exporters. The export premium is higher before firms enter the export market, an indicator of a self-selection effect. We also find an additional premium for firms after they have entered the export market, which is suggestive of a learning by exporting effect. We then use econometric methods to estimate the causal link between export and productivity, and obtain varying results depending on the estimation method. Using a matched differences-in-differences methodology we find a significant positive learning effect. Growth in the productivity of exporting firms is approximately 12 percent 5 years after they enter the export market. When using the system GMM methodology proposed by Blundell and Bond (1998) however, we find a non-significant negative effect of exporting on productivity.
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