Disclaimer: The contents of this paper have been subject to vetting and pass the Disclosure Rules & Regulations set forth by Statistics Canada.
Plant Scale and Exchange-Rate-Induced Productivity Growth
Version of Record online: 24 OCT 2011
© 2011 Wiley Periodicals, Inc.
Journal of Economics & Management Strategy
Volume 20, Issue 4, pages 1197–1230, Winter 2011
How to Cite
Fung, L., Baggs, J. and Beaulieu, E. (2011), Plant Scale and Exchange-Rate-Induced Productivity Growth. Journal of Economics & Management Strategy, 20: 1197–1230. doi: 10.1111/j.1530-9134.2011.00311.x
We are grateful to Statistics Canada, in particular the Economic Analysis Division and John Baldwin, for access to the data used in this paper and to Bob Gibson for data preparation and expedited output vetting. Special thanks are also extended to Daniel Trefler and Alla Lileeva for sharing the tariff data. This paper has benefited from comments from Keith Head, John Baldwin, Azim Essaji, Wulong Gu, Danny Leung, Manish Pandey, Robert Petrunia, Andreas Waldkirch, Ari Van Assche, Constance Smith, Katheryn Russ, the editor, two anonymous referees, and seminar participants at Statistics Canada, Industry Canada, the University of Victoria, Wilfred Laurier University, University of Winnipeg, Academia Sinica, National Taiwan University, National Tsing-Hua University, Lakehead University, the 2007 CEA meetings, the 2008 Empirical Investigations in Trade and Investment meeting, the 2008 Econometric Society summer meetings, and the 2008 Statistics Canada Socio-Economic Conference. Financial support from SSRHC is gratefully acknowledged. Loretta Fung gratefully acknowledges financial support from Statistics Canada post-doctoral program and from the University of Alberta. Any errors and omissions are our own.
- Issue online: 24 OCT 2011
- Version of Record online: 24 OCT 2011
This paper examines the impact of exchange rate movements on firm-level productivity through changes in the scale of production. We employ plant-level data to examine whether, and in what direction, exchange rate movements affect the scale of production, and how these changes in scale influence productivity. The paper finds that a real appreciation of the domestic currency reduces shipments and this negative effect is larger for exporters (both domestic and foreign owned). The paper also finds evidence that the appreciation-induced reduction of scale negatively affects productivity at the plant level. This scale effect more than offsets any potential gains from the appreciation-induced reduction in the price of imported inputs.