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Import Protection as Export Destruction

Author

Listed:
  • Hiroyuki Kasahara

    () (University of Western Ontario)

  • Beverly Lapham

    () (Queen's University)

Abstract

This paper develops an open economy model with heterogeneous final goods producers who simultaneously choose whether to export their goods and whether to use imported intermediates. The model highlights mechanisms whereby import policies affect aggregate productivity, resource allocation, and industry export activity along both the extensive and intensive margins. Using the theoretical model, we develop and estimate a structural empirical model that incorporates heterogeneity in productivity and shipping costs using Chilean plant-level manufacturing data. The estimated model is consistent with the key features of the data regarding productivity, exporting, and importing. We perform a variety of counterfactual experiments to assess quantitatively the positive and normative effects of barriers to trade in import and export markets. These experiments suggest that there are substantial aggregate productivity and welfare gains due to trade. Furthermore, because of import and export complementarities, policies which inhibit the importation of foreign intermediates can have a large adverse effect on the exportation of final goods.

Suggested Citation

  • Hiroyuki Kasahara & Beverly Lapham, 2006. "Import Protection as Export Destruction," Working Papers 1064, Queen's University, Department of Economics.
  • Handle: RePEc:qed:wpaper:1064
    as

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    File URL: http://qed.econ.queensu.ca/working_papers/papers/qed_wp_1064.pdf
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    References listed on IDEAS

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    3. Bernard, Andrew B. & Bradford Jensen, J., 1999. "Exceptional exporter performance: cause, effect, or both?," Journal of International Economics, Elsevier, vol. 47(1), pages 1-25, February.
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    5. Nina Pavcnik, 2002. "Trade Liberalization, Exit, and Productivity Improvements: Evidence from Chilean Plants," Review of Economic Studies, Oxford University Press, vol. 69(1), pages 245-276.
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    8. Liu, Lili, 1993. "Entry-exit, learning, and productivity change Evidence from Chile," Journal of Development Economics, Elsevier, vol. 42(2), pages 217-242, December.
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    11. Daniel Trefler, 2004. "The Long and Short of the Canada-U. S. Free Trade Agreement," American Economic Review, American Economic Association, vol. 94(4), pages 870-895, September.
    12. Rust, J., 1991. "Estimation of dynamic Structural Models: Problems and Prospects Part I : Discrete Decision Processes," Working papers 9106, Wisconsin Madison - Social Systems.
    13. Kasahara, Hiroyuki & Rodrigue, Joel, 2008. "Does the use of imported intermediates increase productivity? Plant-level evidence," Journal of Development Economics, Elsevier, vol. 87(1), pages 106-118, August.
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    17. Andrew B. Bernard & J. Bradford Jensen & Peter K. Schott, 2009. "Importers, Exporters and Multinationals: A Portrait of Firms in the U.S. that Trade Goods," NBER Chapters,in: Producer Dynamics: New Evidence from Micro Data, pages 513-552 National Bureau of Economic Research, Inc.
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    Cited by:

    1. 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.
    2. Ramanarayanan, Ananth, 2017. "Imported inputs, irreversibility, and international trade dynamics," Journal of International Economics, Elsevier, vol. 104(C), pages 1-18.
    3. 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.
    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.

    More about this item

    Keywords

    Importing; Exporting; Firm Heterogeneity; Aggregate Productivity; Resource Reallocation;

    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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