Does Importing more Inputs Raise Exports? Firm Level Evidence from France

Why would an increase in imported inputs rise exports? We argue that importing more varieties of intermediate inputs increases firm’s productivity and thereby makes the firm able to overcome the export fixed costs. Whereas the literature evidences the positive effect of an increase in imported inputs on firms’ productivity and shows that only the most productive firms export, the link between imported intermediate inputs and export scope has not been made. This paper bridges the gap by studying the impact of imported inputs on the margins of exports. We use a firms’ level database of imports at the product (HS6) level provided by French Customs for the 1995-2005 period. Access to new varieties of inputs may increase productivity, and thereby exports, through better complementarity of inputs and transfer of technology. We test for these different mechanisms by distinguishing the origin of imports (developing vs. developed countries). We find a significant impact of higher diversification and increased number of imported inputs varieties on firm’s TFP and export scope. Both the complementarity and transfer of technology mechanisms seem to matter.