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Does the Use of Imported Intermediates Increase Productivity? Plant-Level Evidence

This paper examines whether importing intermediate goods improves plant performance. While addressing the issue of simultaneity of a productivity shock and the decision to import intermediates, we estimate the impact of the use of foreign intermediates on plants' productivity using plant-level Chilean manufacturing panel data. We found that switching from being a non- importer to being an importer of foreign intermediates can improve productivity by 2.3 to 22.0 percent. We also investigate the plant dynamic decisions to import, invest, and exit. The results show that having imported last year substantially increases the probability of importing this year, providing the evidence for sunk start-up costs of importing. We also found that importers accumulate more capital and are less likely to exit than non-importers, which indicates that importing intermediates may play an important role in reallocating resources across heterogeneous plants.

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File URL: http://economics.uwo.ca/epri/workingpapers_docs/wp2005/Kasahara_07.pdf
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Paper provided by University of Western Ontario, Economic Policy Research Institute in its series University of Western Ontario, Economic Policy Research Institute Working Papers with number 20057.

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Date of creation: 2005
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Handle: RePEc:uwo:epuwoc:20057
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Economic Policy Research Institute, Social Science Centre, University of Western Ontario, London, Ontario, Canada N6A 5C2

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Web page: http://economics.uwo.ca/research/research_papers/epri_workingpapers.html

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  1. Ackerberg, Daniel & Caves, Kevin & Frazer, Garth, 2006. "Structural identification of production functions," MPRA Paper 38349, University Library of Munich, Germany.
  2. Hiroyuki Kasahara & Beverly Lapham, 2008. "Productivity and the Decision to Import and Export: Theory and Evidence," CESifo Working Paper Series 2240, CESifo Group Munich.
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  5. Fernandes, Ana M., 2003. "Trade policy, trade volumes, and plant-level productivity in Colombian manufacturing industries," Policy Research Working Paper Series 3064, The World Bank.
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  9. Zvi Griliches & Jacques Mairesse, 1995. "Production Functions: The Search for Identification," NBER Working Papers 5067, National Bureau of Economic Research, Inc.
  10. Roberts, Mark J & Tybout, James R, 1997. "The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs," American Economic Review, American Economic Association, vol. 87(4), pages 545-64, September.
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  12. Geweke, John F. & Keane, Michael P. & Runkle, David E., 1997. "Statistical inference in the multinomial multiperiod probit model," Journal of Econometrics, Elsevier, vol. 80(1), pages 125-165, September.
  13. Benoît Mulkay & Bronwyn H, Hall & Jacques Mairesse, 2000. "Firm Level Investment and R&D in France and the United States : A Comparison," Working Papers 2000-49, Centre de Recherche en Economie et Statistique.
  14. Keller, W., 1996. "Trade and the Transmission of Technology," Working papers 9620, Wisconsin Madison - Social Systems.
  15. Bernard, A., 1997. "Exceptional Exporter Performance: Cause, Effect, or Both?," Working papers 97-21, Massachusetts Institute of Technology (MIT), Department of Economics.
  16. Vassilis A. Hajivassiliou & Daniel L. McFadden & Paul Ruud, 1993. "Simulation of Multivariate Normal Rectangle Probabilities and their Derivatives: Theoretical and Computational Results," Working Papers _024, Yale University.
  17. J Bradford Jensen & Andrew B Bernard, 2001. "Why Some Firms Export," Working Papers 01-05, Center for Economic Studies, U.S. Census Bureau.
  18. Nina Pavcnik, 2000. "Trade Liberalization, Exit, and Productivity Improvements: Evidence from Chilean Plants," NBER Working Papers 7852, National Bureau of Economic Research, Inc.
  19. David T. Coe & Elhanan Helpman & Alexander Hoffmaister, 1995. "North-South R&D Spillovers," NBER Working Papers 5048, National Bureau of Economic Research, Inc.
  20. Richard Ericson & Ariel Pakes, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Oxford University Press, vol. 62(1), pages 53-82.
  21. Johannes Van Biesebroeck, 2003. "Revisiting Some Productivity Debates," NBER Working Papers 10065, National Bureau of Economic Research, Inc.
  22. Laszlo Halpern & Miklos Koren & Adam Szeidl, 2006. "Imports and Productivity," 2006 Meeting Papers 796, Society for Economic Dynamics.
  23. Feenstra, Robert C & Markusen, James R & Zeile, William, 1992. "Accounting for Growth with New Inputs: Theory and Evidence," American Economic Review, American Economic Association, vol. 82(2), pages 415-21, May.
  24. Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
  25. Zvi Griliches & Jerry A. Hausman, 1984. "Errors in Variables in Panel Data," NBER Technical Working Papers 0037, National Bureau of Economic Research, Inc.
  26. Horowitz, Joel L., 2001. "The Bootstrap," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 5, chapter 52, pages 3159-3228 Elsevier.
  27. Richard Blundell & Stephen Bond, 2000. "GMM Estimation with persistent panel data: an application to production functions," Econometric Reviews, Taylor & Francis Journals, vol. 19(3), pages 321-340.
  28. Andrew B Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2000. "Plants and productivity in international trade," Working Papers 00-08, Center for Economic Studies, U.S. Census Bureau.
  29. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
  30. Mary Amiti & Jozef G Konings, 2005. "Trade Liberalization, Intermediate Inputs, and Productivity; Evidence from Indonesia," IMF Working Papers 05/146, International Monetary Fund.
  31. Chamberlain, Gary, 1982. "Multivariate regression models for panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 5-46, January.
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