Article ID Journal Published Year Pages File Type
5066354 European Economic Review 2017 28 Pages PDF
Abstract

This paper investigates the long-term effect of importing intermediate inputs on firm revenue and productivity, by estimating a dynamic model of firms' endogenous importing decisions with random sunk and fixed costs of importing. Based on counterfactual analysis, the model decomposes the gains from importing into a static revenue effect, resulting from improved quality and variety of available inputs, and a dynamic productivity effect, resulting from improved productivity. Empirical results from a Colombian plant-level dataset show that both the static and dynamic effects are important sources of gains from importing. It is also shown that the two types of trade liberalization, either by reducing the import tariff or by reducing sunk and fixed costs of import, both have a substantial impact on firm value.

Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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