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New imported inputs, new domestic products

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  • Colantone, Italo
  • Crinò, Rosario

Abstract

We study the relationship between new imported inputs and the introduction of new domestic products. To this purpose, we assemble a novel data set covering 25 European countries over 1995–2007 and containing information on domestic production and bilateral trade for the universe of goods. We develop a procedure to identify new imported inputs and new domestic products, while dealing with the complications raised by the yearly changes in the commodity classifications. We augment these data with information on prices and novel estimates of quality. We organize the empirical analysis around a version of the endogenous growth model with expanding variety, in which inputs are allowed to be heterogeneous in terms of quality. In line with this framework, we find three main results. First, new imported inputs have a strong positive effect on product creation in Europe. Second, they work through a combination of mechanisms, allowing countries to benefit from both wider and better sets of intermediate products. Finally, new imported inputs give a substantial boost to output growth in manufacturing.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 92 (2014)
Issue (Month): 1 ()
Pages: 147-165

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Handle: RePEc:eee:inecon:v:92:y:2014:i:1:p:147-165

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Web page: http://www.elsevier.com/locate/inca/505552

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Keywords: New intermediates; New goods; Output growth; Prices; Quality; Product-level data;

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Cited by:
  1. Rosario Crinò, 2011. "Imported Inputs and Skill Upgrading," Development Working Papers 323, Centro Studi Luca d\'Agliano, University of Milano, revised 27 Dec 2011.
  2. Olper, Alessandro & Pacca, Lucia & Curzi, Daniele, 2013. "Trade, Import Competition and Productivity Growth In the Food Industry," Proceedings Issues, 2013: Productivity and Its Impacts on Global Trade, June 2-4, 2013. Seville, Spain 152385, International Agricultural Trade Research Consortium.
  3. David Aristei & Davide Castellani & Chiara Franco, 2013. "Firms’ exporting and importing activities: is there a two-way relationship?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 149(1), pages 55-84, March.
  4. Rosario Crinò & Laura Ogliari, 2014. "Finanical Frictions, Product Quality, And International Trade," Working Papers wp2014_1403, CEMFI.
  5. Italo Colantone & Rosario Crinò, 2011. "New Imported Inputs, New Domestic Products," Development Working Papers 312, Centro Studi Luca d\'Agliano, University of Milano.

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