Abstract

Combining establishment-level data from the 1999–2003 Manufacturing Industry Surveys and the 2007 Industrial Census of Thailand, this paper examines and documents the relationships between establishment-level profitability and three types of international traders - exporters, importers and two-way traders in Thai manufacturing. The main analysis is divided into three parts. First, we empirically measure trader profitability premia for various profit measures such as operating profit, sales profit, and the rate of profit. Second, we test for trader profitability premia by running regressions of different profit measures on trader status using probit estimation to provide further evidence. Third, we examine whether trade activities are related to firm profitability. Comparing between four groups of firms: two-way traders (being both exporters and importers), only exporters, only importers, and firms that do not trade internationally, the results generally reveal that exporters tend to be the most profitable groups of internationally functioning firms. Two-way traders and importers are roughly the same in terms of profit performance, and firms with no trade are the least profitable as there is evidence for international trader profitability premia. We additionally find that there is a positive correlation between being various types of traders and firm profitability. Particularly, being an exporter is mostly and strongly correlated with an increase in sales profit and the rate of profit of a firm.

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