International Trade and Investment

Firms That Engage in International Trade Are Strong Performers

   At the microeconomic level, firms engaged in international trade outperform domestically oriented firms on many dimensions. Research has shown that firms engaged in international trade have higher productivity than their counterparts engaged solely in domestic activity. One study found that value added per employee, one simple measure of productivity, was 15 percent higher in manufacturing exporting firms than in firms that did not export (controlling for industry effects, plant size, and geographic location). And these productivity effects are reflected in higher wages: the wages paid by manufacturing plants that export are 9 percent higher on average than wages paid by non-exporting plants of the same size. Wages in service-oriented firms that export are, on average, 13 percent higher than their purely domestic counterparts of the same size.

   One recent study that examined the dynamics of globally engaged firms between 1993 and 2000 found that firms engaged in international trade had a higher survival rate (65 percent) than the average for all firms in the country (53 percent). In addition, a firm that began to trade during this time period increased employment by nearly 100 percent on average, while a firm that quit trading experienced a decline in employment.

   An increasing number of American workers are employed by firms engaged in international trade. Between 1993 and 2000, firms that trade increased employment by 9.8 million workers, and the share of the American workforce employed by a firm engaged in trade increased from 40 percent to approximately 42 percent. Applied to today's workforce, this result implies that over 57 million American workers are currently employed by a firm that engages in international trade.