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Imports and Productivity

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  • Halpern, László
  • Koren, Miklós
  • Szeidl, Adam

Abstract

What is the effect of imports on productivity? To answer this question, we estimate a structural model of producers using product-level import data for a panel of Hungarian manufacturing firms from 1992 to 2001. In our model with heterogenous firms, producers choose to import or purchase domestically varieties of intermediate inputs. Imports affect firm productivity through expanding variety as well as improved input quality. The model leads to a production function where the total factor productivity of a firm depends on the share of inputs imported. To estimate this import-augmented production function, we extend the Olley and Pakes (1996) procedure for a setting with an additional state variable, the number of input varieties imported. Our results suggest that the role of imports is both statistically and economically significant. Imports are responsible for 30% of the growth in aggregate total factor productivity in Hungary during the 1990s. About 50% of this effect is through imports advancing firm level productivity, while the remaining 50% comes from the reallocation of capital and labour to importers.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5139.

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Date of creation: Jul 2005
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Handle: RePEc:cpr:ceprdp:5139

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Keywords: imports; intermediate inputs; productivity;

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  1. Bernard, A., 1997. "Exceptional Exporter Performance: Cause, Effect, or Both?," Working papers 97-21, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. George S Olley & Ariel Pakes, 1992. "The Dynamics Of Productivity In The Telecommunications Equipment Industry," Working Papers 92-2, Center for Economic Studies, U.S. Census Bureau.
  3. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Wiley Blackwell, vol. 70(2), pages 317-341, 04.
  4. Andrew B. Bernard & J. Bradford Jensen & Peter K. Schott, 2005. "Importers, Exporters, and Multinationals: A Portrait of Firms in the U.S. that Trade Goods," NBER Working Papers 11404, National Bureau of Economic Research, Inc.
  5. David Hummels & Volodymyr Lugovskyy, 2005. "Trade in Ideal Varieties: Theory and Evidence," NBER Working Papers 11828, National Bureau of Economic Research, Inc.
  6. László Halpern & Miklós Koren, 2007. "Pricing to Firm: an Analysis of Firm- and Product-level Import Prices," Review of International Economics, Wiley Blackwell, vol. 15(3), pages 574-591, 08.
  7. Muendler, Marc-Andreas, 2004. "Trade, Technology, and Productivity: A Study of Brazilian Manufacturers, 1986-1998," University of California at San Diego, Economics Working Paper Series qt6m96c2r7, Department of Economics, UC San Diego.
  8. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
  9. Mary Amiti, 2000. "Trade Liberalisation of Intermediate Inputs," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 33(4), pages 299-302.
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