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Imported Inputs and Productivity

  • László Halpern
  • Miklós Koren
  • Adam Szeidl

We estimate a model of importers in Hungarian micro data and conduct counterfactual policy analysis to investigate the effect of imports on productivity. We find that importing all foreign varieties would increase firm productivity by 12 percent, almost two-fifths of which is due to imperfect substitution between foreign and domestic goods. The effectiveness of import use is higher for foreign firms and increases when a firm becomes foreign-owned. Our estimates imply that during 1993-2002 one-third of the productivity growth in Hungary was due to imported inputs. Simulations show that the productivity gain from a tariff cut is largest when the economy has many importers and many foreign firms, implying policy complementarities between tariff cuts, dismantling non-tariff barriers, and FDI liberalization.

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Paper provided by Center for Firms in the Global Economy in its series CeFiG Working Papers with number 8.

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Date of creation: 16 Sep 2011
Date of revision: 16 Sep 2011
Handle: RePEc:cfg:cfigwp:8
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