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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 Paris 1 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, 2017. "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
    DOI: 10.1093/wber/lhw062
    Note: View the original document on HAL open archive server: https://hal-paris1.archives-ouvertes.fr/hal-01387558
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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. Maria Bas & Caroline Paunov, 2019. "What gains and distributional implications result from trade liberalization?," Post-Print halshs-02052739, HAL.
    3. Chakraborty, Pavel & Chatterjee, Chirantan, 2017. "Does environmental regulation indirectly induce upstream innovation? New evidence from India," Research Policy, Elsevier, vol. 46(5), pages 939-955.
    4. 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.
    5. Chakraborty, Pavel & Raveh, Ohad, 2018. "Input-trade liberalization and the demand for managers: Evidence from India," Journal of International Economics, Elsevier, vol. 111(C), pages 159-176.
    6. Maria Bas & Ivan Ledezma, 2020. "Trade liberalization and heterogeneous firms’ adjustments: evidence from India," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 156(2), pages 407-441, May.

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    More about this item

    Keywords

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

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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