Trade reorientation and productivity growth in Bulgarian enterprises

Although the impact of international trade is usually analyzed at the macroeconomic level or at the industry level, the authors here explicitly restrict their analysis to the microeconomic level, the level of the firm. Specifically, they investigate the relative importance of integration with world markets as a source of productivity growth in Bulgarian firms, controlling for macroeconomic forces. They focus on the potential importance to economic growth of greater access (after trade liberalization) to global markets for designs, equipment, and intermediates. By buying intermediates and equipment, firms are allowed to improve their productivity and to learn by exporting to more mature markets. The changes that occurred in trade patterns after opening the economy provide one indicator of the manager's attempts to import better technology. The partial correlations suggest that firms that reorient their trade patterns, which is arguably the most appropriate measure of trade integration for transition economies, tend to have higher growth rates for total factor productivity (TFP).