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Does input-trade liberalization affect firms' foreign technology choice?

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  • Maria Bas

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Antoine Berthou

    (Banque de France)

Abstract

This paper studies the impact of input-trade liberalization on firms' decision to upgrade foreign technology embodied in imported capital goods. Our empirical analysis is motivated by a simple theoretical framework of endogenous technology adoption, heterogeneous firms and imported inputs. The model predicts a positive effect of input tariff reductions on firms' technology choice to source capital goods from abroad. This effect is heterogeneous across firms depending on their initial productivity level. Relying on India's trade liberalization episode in the early 1990s, we demonstrate that the probability of importing capital goods is higher for firms producing in industries that have experienced greater cuts on tariffs on intermediate goods. Only those firms in the middle range of the initial productivity distribution have benefited from input-trade liberalization to upgrade their technology. JEL classification: F10, F12 and F14.

Suggested Citation

  • Maria Bas & Antoine Berthou, 2016. "Does input-trade liberalization affect firms' foreign technology choice?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01387558, HAL.
  • Handle: RePEc:hal:cesptp:hal-01387558
    Note: View the original document on HAL open archive server: https://hal-paris1.archives-ouvertes.fr/hal-01387558
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    References listed on IDEAS

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    Cited by:

    1. Bahar Baziki, Selva & Ginja, Rita & Borota Milicevic, Teodora, 2015. "Trade Competition, Technology and Labor Re-allocation," Working Paper Series, Center for Labor Studies 2016:1, Uppsala University, Department of Economics.
    2. Bas, Maria & Paunov, Caroline, 2019. "What gains and distributional implications result from trade liberalization?," MERIT Working Papers 003, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    3. repec:eee:respol:v:46:y:2017:i:5:p:939-955 is not listed on IDEAS
    4. repec:eee:deveco:v:135:y:2018:i:c:p:117-141 is not listed on IDEAS
    5. repec:eee:inecon:v:111:y:2018:i:c:p:159-176 is not listed on IDEAS
    6. Maria Bas & Caroline Paunov, 2019. "What gains and distributional implications result from trade liberalization?," Post-Print halshs-02052739, HAL.
    7. Imbruno, Michele & Ketterer, Tobias D., 2018. "Energy efficiency gains from importing intermediate inputs: Firm-level evidence from Indonesia," Journal of Development Economics, Elsevier, vol. 135(C), pages 117-141.

    More about this item

    Keywords

    firm heterogeneity and Indian firm-level data; Input-trade liberalization; firms' decision to import capital goods;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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