Exports and profitability: a note from quantile regression approach

Abstract

Studies of the linkage between exports and profitability often use mean regression approaches and focus only on European countries. Using a panel data quantile regression approach, this study analyses the linkage between export behaviour and profit growth in Vietnam. Using a panel dataset from 2005 to 2009, our results show an insignificant linkage between export status and firm profit growth when using OLS. However, when using a quantile approach, export participation is found to be positively related to profitability for those firms with high profit growth but negatively related for those firms with low profit growth. This might suggest that the productivity advantages of exporters with low profit growth are absorbed by costs relating to trading activities in overseas markets.

Keywords:

• exports
• profitability
• quantile approach
• SMEs

JEL Classification:

• F14
• O12

Acknowledgement

The author Huong Vu is grateful for the helpful feedback from Prof. Canay regarding this article.

Funding

The author Huong Vu gratefully acknowledges financial support from the Vietnamese government.

Notes

¹ This data has been kindly shared by Prof. John Rand.

² Variables with current prices are deflated to 1994 prices using GDP deflators to avoid biases that might arise from inflation.

³ The direct information of import status is not available. Export intensity is also unavailable in 2007. The caveats of data prevent us from considering these covariates in the regression.

⁴ We also use firm size squared and firm age squared to capture the nonlinear nature of the linkages.

⁵ The results are available on request.