We conduct a randomized control trial that generates exogenous variation in the access to foreign markets for rug producers in Egypt. Using this methodology and detailed survey data, we causally identify the impact of exporting on firm performance. Treatment firms report 15-25 percent higher profits and exhibit large improvements in quality alongside reductions in quantity-based productivity relative to control firms. These findings do not simply reflect firms being offered higher margins to manufacture high-quality products that take longer to produce. Instead, we find evidence of learning-by-exporting whereby exporting induces changes in technical efficiency. First, treatment firms have higher productivity and quality after accounting for rug specifications. Second, when asked to produce an identical domestic rug using the same technology, treatment firms receive higher quality assessments despite no difference in production time. Third, treatment firms exhibit learning curves over time for both quality and productivity. Finally, we document knowledge transfers between buyers, intermediaries and producers with quality increasing most along the specific dimensions that the knowledge pertained to.
Atkin, D.; Khandelwal, A.K.; Osman, A. PEDL Research Paper. Exporting and Firm Performance: Evidence from a Randomized Trial. (2014) 61 pp.