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Imports, supply chains and firm productivity

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  • Newman, Carol
  • Rand, John
  • Tarp, Finn

Abstract

This paper explores how competition-induced productivity gains from imports in intermediate producing sectors transmit through the supply chain. Based on firm-level panel data from Vietnam, we show that in addition to the productivity premium associated with importing intermediate inputs, firms that use domestically-produced inputs from more import-intensive sectors also have higher productivity. We find evidence that import competition leads to product differentiation, in particular higher quality output in sectors where there is greater scope for quality variation, leading to better quality domestically-produced inputs. We also find evidence that non-importing firms that experience productivity gains due to greater import intensity in upstream sectors change their input mix and become more capital intensive. We conclude that ignoring the gains from trade through this mechanism may significantly underestimate the impact of trade on productivity.

Suggested Citation

  • Newman, Carol & Rand, John & Tarp, Finn, 2023. "Imports, supply chains and firm productivity," World Development, Elsevier, vol. 172(C).
    • Handle: RePEc:eee:wdevel:v:172:y:2023:i:c:s0305750x23001894
    DOI: 10.1016/j.worlddev.2023.106371
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    More about this item

    Keywords

    Imports; Supply chains; Productivity; Vietnam;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F61 - International Economics - - Economic Impacts of Globalization - - - Microeconomic Impacts
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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