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Access to new imported varieties and total factor productivity: Firm level evidence from France

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  • Irac, D.

Abstract

This paper aims at providing causal evidence on the effects of expanded imported varieties on total factor productivity (TFP) using French firm level data. Our strategy is to build an exact index of increase in varieties -using the Broda, Greenfield and Weinstein (2006) methodology. This index captures the impact of new varieties on total factor productivity within a Dixit-Stiglitz framework based on a Constant Elasticity of Substitution production function. We argue that measurement problems are central to the question we try to address. We deal with this issue using alternative instrumental variables strategies. First, we work with sectoral variety index in order to reduce the effect of outliers. Secondly, working with estimated bilateral imports rather than observed ones, we are able to adjust the variety index for measurement errors and find a strong impact of this index on TFP. New varieties that enter the production function appear as weakly substitutable- with an elasticity of substitution ranging from 1.25 and 1.5 - and conducive to significant TFP growth.

Suggested Citation

  • Irac, D., 2008. "Access to new imported varieties and total factor productivity: Firm level evidence from France," Working papers 204, Banque de France.
  • Handle: RePEc:bfr:banfra:204
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    Cited by:

    1. Philippe Askenazy & Aida Caldera & Guillaume Gaulier & Delphine Irac, 2015. "Financial constraints and foreign market entries or exits: firm-level evidence from France," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 151(2), pages 231-253, May.

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    More about this item

    Keywords

    Variety ; Trade ; Total Factor Productivity.;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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