The Export-Growth Relationship: Estimating a Dose-Response Function

The relationship between individual firms’ export behaviour and firm performance has been studied extensively in the economic literature. However, most studies from the field of economics only distinguish between exporting and nonexporting companies, using the firms’ export status as a binary treatment variable and comparing the performance of exporting and nonexporting firms. This article introduces the newly developed generalized propensity score (GPS) methodology to the literature of individual firms’ export behaviour. Instead of a binary treatment variable, the GPS method allows for continuous treatment, that is, different levels of the firms’ export activities. Based on the GPS methodology, a dose-response function is estimated, depicting the relationship between the firms’ export-sales ratio and their subsequent sales growth rate as a measure of firm performance.