Irish firms' productivity and imported inputs

In this paper, we empirically analyze the evolution of firms’ productivity and how the efficiency changes with variations in the inputs’ origin. Using firm-level information on a sample of Irish firms, we assess the importance of the imported inputs’ quota for a firm’s efficiency, as well as starting import activity. The main findings are that an increase in the intensive margin of imports raises firms’ efficiency of domestic firms; in addition heterogeneous effects across firms are detected. Unlike the findings of most of the literature, there is weak evidence of self-selection in import activity; differently from previous research when we introduce fixed effects, the self-selection disappears. Instead, the few observed firms that start importing raise their productivity compared to non-importing firms; learning by importing is suspected. The results suggest an important policy implication: policies that favor the imports of intermediates enhance the productivity of domestic firms, making them more competitive in the international markets.