Abstract

This paper undertakes a multi-country study to investigate heterogeneity in productivity levels across firms choosing to trade either directly or indirectly through intermediaries, both in the export and import markets. To this end, we implement a stochastic dominance criterion to compare the entire distribution of Total Factor Productivity (TFP) of traders, and we use a generalized ordered logit model to investigate the extent to which a shift in TFP produces a reallocation of firms among different categories of traders. Compared to previous research, our novel findings suggest a productivity sorting of firms which mostly depends on the mode of trade rather than the side. From a policy perspective, our work implies the need to create the conditions for endowing local firms with the necessary knowledge and capabilities to overcome the productivity threshold levels to enter and benefit from direct international trade.

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