Imported inputs and skill upgrading

This paper studies the effect of imported inputs on the relative demand for high-skill labor. To this purpose, it applies propensity score matching techniques to firm-level data for 27 transition countries. The results show that importing inputs induces skill upgrading. Specifically, it explains more than one-quarter of the unconditional difference between importers and non-importers in the employment share of high-skill workers. The paper explores possible mechanisms behind this result. In particular, it reports suggestive evidence that importing leads firms to engage in high-skill intensive activities, such as production of new goods, improvement of product quality and, to a lesser extent, R&D and technology adoption.

► Analysis of the effects of imported inputs on skill upgrading. ► Propensity score matching applied to firm-level data for 27 countries. ► Imported inputs increase the relative demand for high-skill labor. ► Importing induces firms to engage in high-skill intensive activities.