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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. Mirabelle Muûls & Mauro Pisu, 2007. "Imports and Exports at the Level of the Firm : Evidence from Belgium," Working Paper Research 114, National Bank of Belgium.
  2. Kasahara, Hiroyuki & Lapham, Beverly, 2013. "Productivity and the decision to import and export: Theory and evidence," Journal of International Economics, Elsevier, vol. 89(2), pages 297-316.
  3. Pinelopi Goldberg & Amit Khandelwal & Nina Pavcnik & Petia Topalova, 2009. "Imported Intermediate Inputs and Domestic Product Growth: Evidence from India," Working Papers 1179, Princeton University, Department of Economics, Center for Economic Policy Studies..
  4. Eric A. Verhoogen, 2008. "Trade, Quality Upgrading, and Wage Inequality in the Mexican Manufacturing Sector," The Quarterly Journal of Economics, MIT Press, vol. 123(2), pages 489-530, 05.
  5. Kugler, Maurice & Verhoogen, Eric A., 2009. "The Quality-Complementarity Hypothesis: Theory and Evidence from Colombia," CEPR Discussion Papers 7119, C.E.P.R. Discussion Papers.
  6. Maria Bas & Ivan Ledezma, 2008. "Trade integration and within-plant productivity evolution in Chile," PSE Working Papers halshs-00588309, HAL.
  7. Natalie Chen & Jean Imbs & Andrew Scott, 2006. "The dynamics of trade and competition," Working Paper Research 91, National Bank of Belgium.
  8. Laszlo Halpern & Miklos Koren & Adam Szeidl, 2006. "Imports and Productivity," 2006 Meeting Papers 796, Society for Economic Dynamics.
  9. Kasahara, Hiroyuki & Rodrigue, Joel, 2008. "Does the use of imported intermediates increase productivity? Plant-level evidence," Journal of Development Economics, Elsevier, vol. 87(1), pages 106-118, August.
  10. Pinelopi Goldberg & Amit Khandelwal & Nina Pavcnik & Petia Topalova, 2009. "Trade Liberalization and New Imported Inputs," American Economic Review, American Economic Association, vol. 99(2), pages 494-500, May.
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Cited by:
  1. Chevassus-Lozza, Emmanuelle & Gaigné, Carl & Le Mener, Léo, 2013. "Does input trade liberalization boost downstream firms' exports? Theory and firm-level evidence," Journal of International Economics, Elsevier, vol. 90(2), pages 391-402.
  2. Joern Kleinert & Nico Zorell, 2012. "The export-magnification effect of offshoring," Graz Economics Papers 2012-09, University of Graz, Department of Economics.

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