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Import Churning and Export Performance of Multi-Product Firms

  • Jože P. Damijan
  • Jozef Konings
  • Sašo Polanec

This paper analyzes the impact of churning in the imported varieties of capital and intermediate inputs on firm export scope and productivity. Using detailed data on imports and exports at the firm–product-market level, we document substantial churning in both imports and exports for the Slovenian manufacturing firms in the period 1994-2008. On average, a firm changes about one quarter of imported and exported product-markets every year, while gross churning in terms of added and dropped product-markets is almost three times higher. A substantial share of this product churning is due to simultaneous imports and exports of firms in identical varieties within the same CN-8 product code (so called pass-on-trade). We find that churning in imported varieties is far more important than reduction in tariffs or declines in import prices for firms’ productivity growth and increased export product scope. We also find that gross churning has a bigger impact on firm productivity improvements by a factor of more than 10 in comparison to the net churning. Both adding and dropping of imported input varieties thus seem to be of utmost importance for firms aiming to optimize their input mix towards their most valuable inputs. These effects are further enhanced when excluding the simultaneous trade in identical varieties, suggesting that pass-on-trade has less favorable effects on firms’ long-run performance than regular trade.

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Paper provided by LICOS - Centre for Institutions and Economic Performance, KU Leuven in its series LICOS Discussion Papers with number 30712.

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Date of creation: 2012
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Handle: RePEc:lic:licosd:30712
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  1. Andrew B. Bernard & J. Bradford Jensen & Stephen Redding & Peter K. Schott, 2010. "Wholesalers and retailers in U.S. trade (Long Version)," LSE Research Online Documents on Economics 48896, London School of Economics and Political Science, LSE Library.
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  3. Bernard, Andrew B. & Blanchard, Emily & van Beveren, Ilke & Vandenbussche, Hylke, 2012. "Carry-Along Trade," CEPR Discussion Papers 9067, C.E.P.R. Discussion Papers.
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  5. Bas, Maria & Strauss-Kahn, Vanessa, 2010. "Does importing more inputs raise exports? Firm level evidence from France," MPRA Paper 27315, University Library of Munich, Germany.
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  7. Joel Rodrigue & Hiroyuki Kasahara, 2004. "Does the Use of Imported Intermediates Increase Productivity? Plant-Level Evidence," Econometric Society 2004 North American Summer Meetings 511, Econometric Society.
  8. Gu, Wulong & Baldwin, John R., 2006. "The Impact of Trade on Plant Scale, Production-Run Length and Diversification," Economic Analysis (EA) Research Paper Series 2006038e, Statistics Canada, Analytical Studies Branch.
  9. Dimitra Petropoulou, 2008. "Information Costs, Networks and Intermediation in International Trade," CEP Discussion Papers dp0848, Centre for Economic Performance, LSE.
  10. De Loecker, Jan, 2007. "Do exports generate higher productivity? Evidence from Slovenia," Journal of International Economics, Elsevier, vol. 73(1), pages 69-98, September.
  11. Jože P. Damijan & Črt Kostevc & Sašo Polanec, 2011. "Export Strategies of New Exporters: Why is Export Expansion Along the Extensive Margins so Sluggish?," LICOS Discussion Papers 27711, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  12. Jaan Masso & Priit Vahter, 2011. "Exporting And Productivity: The Effects Of Multi-Market And Multi-Product Export Entry," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 83, Faculty of Economics and Business Administration, University of Tartu (Estonia).
  13. James E. Rauch & Joel Watson, 2004. "Network Intermediaries in International Trade," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(1), pages 69-93, 03.
  14. Jose P. Damijan & Boris Majcen, 2003. "Trade Policy in a Small Advanced Transition Economy: Trade Policy Review of Slovenia, 2002," The World Economy, Wiley Blackwell, vol. 26(9), pages 1369-1394, 09.
  15. Akerman, Anders, 2010. "A Theory on the Role of Wholesalers in International Trade based on Economies of Scope," Research Papers in Economics 2010:1, Stockholm University, Department of Economics.
  16. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2010. "Wholesalers and Retailers in US Trade," American Economic Review, American Economic Association, vol. 100(2), pages 408-13, May.
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