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Imported Inputs and Productivity

Author

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  • László Halpern
  • Miklós Koren
  • Adam Szeidl

Abstract

We estimate a model of importers in Hungarian microdata and conduct counterfactual analysis to investigate the effect of imported inputs on productivity. We find that importing all input varieties would increase a firm's revenue productivity by 22 percent, about one-half of which is due to imperfect substitution between foreign and domestic inputs. Foreign firms use imports more effectively and pay lower fixed import costs. We attribute one-quarter of Hungarian productivity growth during the 1993-2002 period to imported inputs. Simulations show that the productivity gain from a tariff cut is larger when the economy has many importers and many foreign firms. (JEL D24, F13, F14, L60)

Suggested Citation

  • László Halpern & Miklós Koren & Adam Szeidl, 2015. "Imported Inputs and Productivity," American Economic Review, American Economic Association, vol. 105(12), pages 3660-3703, December.
  • Handle: RePEc:aea:aecrev:v:105:y:2015:i:12:p:3660-3703
    Note: DOI: 10.1257/aer.20150443
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    More about this item

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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