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New Imported Inputs, New Domestic Products

Author

Listed:
  • Italo Colantone

    (Erasmus University Rotterdam and ERIM)

  • Rosario Crinò

    (University of Brescia, Centro Studi Luca d�Agliano and IAE-CSIC)

Abstract

We study the effects of new imported inputs on the entry of new domestic products and their characteristics. To this purpose, we construct a novel, comprehensive and extremely detailed dataset, which contains product-level information on foreign trade and domestic production for 25 EU countries over 1995-2007. Using these data, we identify new domestic goods and new imported inputs, controlling for all changes in commodity classifications over time. We then show that new imported inputs substantially boost the introduction of new domestic products. We also show that this effect is directly proportional to the quality of new imported inputs and inversely related to their price (conditional on quality). Finally, we document that new products are characterized by higher prices and higher quality relative to existing goods, and that such premia are larger the greater is the use of new imported inputs in production.

Suggested Citation

  • Italo Colantone & Rosario Crinò, 2011. "New Imported Inputs, New Domestic Products," Development Working Papers 312, Centro Studi Luca d'Agliano, University of Milano.
  • Handle: RePEc:csl:devewp:312
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    More about this item

    Keywords

    New Intermediate Inputs; Product Innovation; Input and Output Prices; Input;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade

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