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Trade, Foreign Inputs and Firms’ Decisions: Theory and Evidence

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  • Maria Bas

Abstract

We investigate the effect of different channels through which input trade liberalization affects firms’ export decisions. We develop a trade model with heterogeneous firms and sectors of varying imported input intensity that reproduces different mechanisms through which the access to foreign inputs affects the performance of domestic firms. In industries with lower input tariffs (or more intensive in imported intermediate goods), more firms become exporters and export larger volumes. The effect of firm productivity on export status and export sales is greater for firms producing in these industries. The export selection process is reinforced by the access to foreign inputs. We provide strong empirical evidence in support of these theoretical predictions based on plant-level panel data from Argentina (1992-2001) and Chile (1990-1999). Our findings suggest that the impact of firm productivity on the probability of exporting and on the volume of exports is more pronounced for firms producing in industries that have a greater access to foreign inputs.

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Bibliographic Info

Paper provided by CEPII research center in its series Working Papers with number 2009-35.

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Date of creation: Dec 2009
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Handle: RePEc:cii:cepidt:2009-35

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Keywords: FIRM HETEROGENEITY; INPUT TRADE LIBERALIZATION; FOREIGN INTERMEDIATE GOODS; FIRM PRODUCTIVITY AND PLANT PANEL DATA;

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References

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  1. Maurice Kugler & Eric Verhoogen, 2008. "The Quality-Complementarity Hypothesis: Theory and Evidence from Colombia," NBER Working Papers 14418, National Bureau of Economic Research, Inc.
  2. Mirabelle Mu�ls & Mauro Pisu, 2009. "Imports and Exports at the Level of the Firm: Evidence from Belgium," The World Economy, Wiley Blackwell, Wiley Blackwell, vol. 32(5), pages 692-734, 05.
  3. Verhoogen, Eric, 2007. "Trade, Quality Upgrading and Wage Inequality in the Mexican Manufacturing Sector," IZA Discussion Papers 2913, Institute for the Study of Labor (IZA).
  4. Chen, Natalie & Imbs, Jean & Scott, Andrew, 2009. "The dynamics of trade and competition," Journal of International Economics, Elsevier, Elsevier, vol. 77(1), pages 50-62, February.
  5. Halpern, László & Koren, Miklós & Szeidl, Adam, 2005. "Imports and Productivity," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5139, C.E.P.R. Discussion Papers.
  6. Hiroyuki Kasahara & Joel Rodrigue, 2005. "Does the Use of Imported Intermediates Increase Productivity? Plant-Level Evidence," University of Western Ontario, Economic Policy Research Institute Working Papers, University of Western Ontario, Economic Policy Research Institute 20057, University of Western Ontario, Economic Policy Research Institute.
  7. Pinelopi Koujianou Goldberg & Amit Kumar Khandelwal & Nina Pavcnik & Petia Topalova, 2010. "Imported Intermediate Inputs and Domestic Product Growth: Evidence from India," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 125(4), pages 1727-1767, November.
  8. Ledezma, Ivan & Bas, Maria, 2010. "Trade Integration and Within-Plant Productivity Evolution in Chile," Economics Papers from University Paris Dauphine, Paris Dauphine University 123456789/6910, Paris Dauphine University.
  9. Pinelopi Goldberg & Amit Khandelwal & Nina Pavcnik & Petia Topalova, 2009. "Trade Liberalization and New Imported Inputs," American Economic Review, American Economic Association, American Economic Association, vol. 99(2), pages 494-500, May.
  10. Hiroyuki Kasahara & Beverly Lapham, 2008. "Productivity and the Decision to Import and Export: Theory and Evidence," CESifo Working Paper Series 2240, CESifo Group Munich.
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Cited by:
  1. Joern Kleinert & Nico Zorell, 2012. "The export-magnification effect of offshoring," Graz Economics Papers, University of Graz, Department of Economics 2012-09, University of Graz, Department of Economics.
  2. Chevassus-Lozza, Emmanuelle & Gaigne, Carl & Le Mener, Leo, 2012. "Does input trade liberalization boost downstream firms’ exports? Theory and firm-level evidence," Working Papers, Structure and Performance of Agriculture and Agri-products Industry (SPAA) 126946, Structure and Performance of Agriculture and Agri-products Industry (SPAA).

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