Product differentiation, export participation and productivity growth: Evidence from Chinese manufacturing firms

•Investigate of learning-by-exporting effect•Learning-by-exporting effect is larger for firms exporting homogeneous products.•Learning-by-exporting effect if larger for firms with larger export sales.•We build a model to rationalize all the patterns found in this paper.

In this paper, we investigate how the degree of export participation and product differentiation affect firms' productivity growth through learning-by-exporting. We extend the model of Melitz and Ottaviano (2008) to endogenize the effort firms allocate to learning. This effort choice depends on both the degree to which firms enter export markets and the extent to which products are differentiated across producers. Using a firm-level dataset from China's manufacturing industries, we implement propensity score matching methods to test the model's predictions. Our results indicate that the degree of export participation is positively correlated with TFP improvements. Simultaneously, we empirically verify that firms exporting less differentiated products experience faster TFP growth than those exporting more differentiated products.