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Import Protection As Export Destruction

Author

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  • Hiroyuki Kasahara

    (Department of Economics, University of Western Ontario)

  • Beverly Lapham

Abstract

This paper develops an open economy model with heterogeneousfinal goods producers who simultaneously choose whether to export theirgoods and whether to use imported intermediates.The model highlights mechanisms whereby import policies affectaggregate productivity, resource allocation, and industry export activityalong both the extensive and intensive margins. Using the theoretical model,we develop and estimate a structural empirical model that incorporatesheterogeneity in productivity and shipping costs using Chilean plant-levelmanufacturing data. The estimated model is consistent with the key featuresof the data regarding productivity, exporting, and importing. We perform avariety of counterfactual experiments to assess quantitatively the positive andnormative effects of barriers to trade in import and export markets. Theseexperiments suggest that there are substantial aggregate productivity andwelfare gains due to trade. Furthermore, because of import and exportcomplementarities, policies which inhibit the importation of foreignintermediates can have a large adverse effect on the exportation of finalgoods.

Suggested Citation

  • Hiroyuki Kasahara & Beverly Lapham, 2006. "Import Protection As Export Destruction," Working Paper 1064, Economics Department, Queen's University.
  • Handle: RePEc:qed:wpaper:1064
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    File URL: https://www.econ.queensu.ca/sites/econ.queensu.ca/files/qed_wp_1064.pdf
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    References listed on IDEAS

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    Cited by:

    1. Ramanarayanan, Ananth, 2017. "Imported inputs, irreversibility, and international trade dynamics," Journal of International Economics, Elsevier, vol. 104(C), pages 1-18.
    2. Feng, Ling & Li, Zhiyuan & Swenson, Deborah L., 2016. "The connection between imported intermediate inputs and exports: Evidence from Chinese firms," Journal of International Economics, Elsevier, vol. 101(C), pages 86-101.
    3. Olivier Cadot & Céline Carrère & Vanessa Strauss-Kahn, 2013. "Trade Diversification, Income, And Growth: What Do We Know?," Journal of Economic Surveys, Wiley Blackwell, vol. 27(4), pages 790-812, September.
    4. Paolo Guerrieri & Filippo Vergara Caffarelli, 2012. "Trade Openness and International Fragmentation of Production in the European Union: The New Divide?," Review of International Economics, Wiley Blackwell, vol. 20(3), pages 535-551, August.
    5. Maria Bas & Vanessa Strauss-Kahn, 2014. "Does importing more inputs raise exports? Firm-level evidence from France," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 150(2), pages 241-275, May.
    6. Idrisova, Vittoria (Идрисова, Виттория), 2017. "Determinants of Value-Added Exports: The Role of Import Demand Factors [Детерминанты Экспорта Добавленной Стоимости: Роль Факторов Спроса На Импорт]," Working Papers 051715, Russian Presidential Academy of National Economy and Public Administration.
    7. Ponomareva, Ekaterina (Пономарева, Екатерина) & Magomedov, Rustam (Магомедов, Рустам), 2017. "Non-Tariff Measures and the Structure of Trade Flows [Нетарифные Меры И Структура Торговых Потоков]," Working Papers 051704, Russian Presidential Academy of National Economy and Public Administration.
    8. Gnangnon, Sèna Kimm, 2020. "Aid for Trade, Export Product Diversification and Import Product Diversification," EconStor Preprints 223021, ZBW - Leibniz Information Centre for Economics.

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    More about this item

    Keywords

    Importing; Exporting; Firm Heterogeneity; Aggregate Productivity; Resource Reallocation;
    All these keywords.

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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