Does importing more inputs raise exports? Firm level evidence from France

Bas, Maria and Strauss-Kahn, Vanessa (2010): Does importing more inputs raise exports? Firm level evidence from France.

Abstract

Following Melitz (2003)'s seminal paper, several theoretical and empirical studies have shown that only the subset of most productive firms export. While other studies provide evidence on a positive effect of an increase in imported inputs on firms' productivity, the link between imported intermediate inputs and export scope has not been made. This paper bridges the gap by studying the impact of imported inputs on the margins of exports. We use a unique firms' level database of imports at the product (HS6) level provided by French Customs for the 1995-2005 period. Access to new varieties of inputs may increase productivity, and thereby exports, through better complementarity of inputs, transfer of technology and/or decreased inputs price index. We test for these different mechanisms by distinguishing the origin of imports (developing vs. developed countries) and constructing an exact price index a la Broda and Weinstein (2006). We find a significant impact of higher diversification and increased number of imported inputs varieties on firm's TFP and export scope. Whereas the complementarity and transfer of technology mechanisms are supported by our results, the price effect seems very limited.

• Item Type: MPRA Paper
• Language: English
• Keywords: Firm heterogeneity, imported inputs, TFP, export scope, varieties, price index, firm-level data
• Subjects: F - International Economics > F1 - Trade > F10 - General; F - International Economics > F1 - Trade > F12 - Models of Trade with Imperfect Competition and Scale Economies ; Fragmentation

References

Ackerberg, D., Caves, K. and Frazer, G., 2007, ``Structural Identification of Production Functions'', working paper, UCLA.

Alvarez, R. and R., Lopez, 2005, ``Exporting and performance: evidence from Chilean plants'', Canadian Journal of Economics, 38(4), 1384--1400.

Amiti, M., and J. Konings, 2007, ``Trade Liberalization, Intermediate Inputs and Productivity: Evidence from Indonesia'', American Economic Review, 97 (5), 1611--1638.

Andersson, M., S. Johansson and H. Loof, 2007, ``Firm Performance and International Trade - Evidence from a Small Open Economy'', Electronic Working Paper Series 99, CESIS.

Arkolakis, C., Demidova, S., Klenow, P., and A. Rodriguez-Clare, 2008, ``Endogenous Variety and the Gains from Trade'', American Economic Review, Papers and Proceedings, 98, 444--450.

Atkeson, A. and A., Burstein, 2010, ``Innovation, Firm dynamics, and International Trade'', Journal of Political Economy.

Aw, B. Y., Chung, S. and M. Roberts, 2000, ``Productivity and Turnover in the Export Market: Micro Evidence from Taiwan and South Korea'', The World Bank Economic Review, 14(1), 65--90.

Aw, B. Y., Roberts, M. and D. Y. Xu, 2009, ``R\&D Investment, Exporting, and Productivity Dynamics'', NBER Working Papers 14670, National Bureau of Economic Research, Inc.

Bas M., 2009, ``Trade, foreign inputs and firms' decisions: Theory and Evidence'', CEPII Working paper 35

Bee Y., M., Roberts and D. Y. Xu, 2008, ``R&D Investments, Exporting, and the Evolution of Firm Productivity'', American Economic Review: Papers & Proceedings, 98(2), 451--456.

Bernard, A. and J. Jensen, 1995, ``Exporters, Jobs, and Wages in U.S. Manufacturing: 1976-1987'', Brooking Papers on Economic Activity: Microeconomics, 54--70.

Bernard, A. and J. Jensen, 1999, ``Exceptional Exporter Performance: Cause, Effect, or Both?'', Journal of International Economics, 47, 1--25.

Bernard, A., S. Redding and P. Schott, 2006, ``Multi-product firms and trade liberalization'', NBER Working Papers 12782.

Biscourp, P. and F. Kramarz, 2007, ``Employment, Skill Structure, and International Trade'', Journal of International Economics, 72, 22-51.

Broda, C. and D. Weinstein, 2006, ``Globalization and the Gains from Variety'', Quarterly Journal of Economics, 121, 541-585.

Broda, C., J. Greenfield and D. Weinstein, 2006, ``From Groundnuts to Globalization: A structural Estimate of Trade and Growth'', NBER Working Papers 12512, 541-585.

Bustos P., 2010, ``Trade Liberalization, Exports and Technology Upgrading: Evidence on the impact of MERCOSUR on Argentinean Firms'', American Economic Review, forthcoming

Castellani, D., F. Serti and C. Tomasi, 2010, ``Firms in International Trade: Importers' and Exporters' Heterogeneity in Italian Manufacturing Industry'', The World Economy, 33(3), 424--457.

Clerides, S., S. Lach and J. Tybout, 1998, ``Is learning by Exporting Important? Micro-dynamic Evidence from Colombia, Mexico, and Morocco'', Quarterly Journal of Economics, 113(3), 903--947.

\item Coe, D., and E., Helpman, 1995, ``International R&D Spillovers'', European Economic Review, 39, 859--887.

Coe, D., and E., Helpman, 1997, ``North-South Spillovers'', Economic Journal, 107, 134--149.

Constantini, J., and M. Melitz, 2007, ``The Dynamics of Firm-Level Adjustment to Trade Liberalization'', Mimeo

Delgado, M.A., J.C. Farinas and S. Ruano, 2002, ``Firm Productivity and Export Markets: a Non-Parametric Approach'', \textit{Journal of International Economics, 57(2), 397--422.

De Loecker, J., 2007, ``Do Exports Generate Higher Productivity? Evidence from Slovania'', Journal of International Economics, 73, 69--98.

Eaton, J., Kortum, S. and F. Kramarz, 2004, ``Dissecting Trade: Firms, Industries, and Export Destinations'', American Economic Review, Papers and Proceedings, 93, 150--154.

Erdem, E. and J. Tybout, 2003, ``Trade Policy and Industrial Sector Responses: Using Evolutionary Models to Interpret the Evidence'', NBER Working Papers 9947.

Ethier, W., 1982, ``National and International Returns to Scale in the Modern Teory of International Trade'', American Economic Review, 72(3), 389--405.

Feenstra, R., 1994, ``New Product varieties and the Measurement of International Prices'', American Economic Review, 84, 157-177.

Feenstra, R. and G. H. Hanson, 1996, ``Foreign Investment, Outsourcing and Relative Wages'', in R.C. Feenstra, G.M. Grossman and D.A. Irwin, eds., The Political Economy of Trade Policy: Papers in Honor of Jagdish Bhagwati, MIT Press, 89-127.

Goldberg, P., A. Khandelwal, N. Pavcnik and P. Topalova, 2009, ``Imported Intermediate Inputs and Domestic Product Growth: Evidence from India'', NBER Working Papers 14416. Forthcoming in Quarterly Journal of Economics.

Grossman, G., and E. Helpman, 1991, ``Innovation and Growth in the Global Economy'', Cambridge, MA: MIT Press.

Halpern, L., Koren, M. and A. Szeidl, 2009, ``Imported inputs and Productivity'', Federal Reserve Bank of New York, mimeo, 2006

Hallak J.C., and J. Sivadasan, 2009, ``Firms' Exporting Behavior under Quality Constraints'', NBER Working Papers 14928.

Hummels, D., Ishii, J., and K.M. Yi, 2001, ``The Nature and Growth of Vertical Specialization in World Trade'', Journal of International Economics, 54(1), 75--96.

Kasahara, H., and B. Lapham, 2006, ``Import Protection as Export Destruction'', Working Papers 1064, Queen's University.

Kasahara H. and J. Rodrigue, 2008, ``Does the Use of Imported Intermediates Increase Productivity? Plant-Level Evidence'', Journal of Development Economics, 87, 106--118.

Katayama, H., Lu, S. and J. Tybout, 2003, ``Why Plant-Level Productivity Studies are Often Misleading, and an Alternative Approach to Interference'', NBER Working Papers 9617.

Keller, W., 2002, ``Geographic Localization of International Technology Diffusion'', Journal of Economic Growth, 7, 5--24.

Keller, W., 2004, ``International Technology Diffusion'', Journal of Economic Literature, XLII, 752--782.

Krugman, P., 1979, ``Increasing Returns, Monopolistic Competition, and International Trade'', Journal of International Economics, 9(4), 469--479.

Kugler, M., and E. Verhoogen, 2008, ``Product Quality at the Plant Level: Plant Size, Exports, Output Prices and Input Prices in Columbia'', Columbia University Discussion Paper #0708-12.

Loof, H. and M. Anderson, 2008, ``Imports, Productivity and the Origin Markets - The Role of Knowledge-Intensive Economies'', CESIS Electronic Working Paper # 146, Royal Institute of Technology.

Markusen, J., 1989 ``Trade in Producer Services and in Other Specialized Intermediate Inputs'', American Economic Review, 79(1), 85-95.

Melitz, M., 2003 ``The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity'', Econometrica, 71, 1695-1725.

Muendler, M., 2004, ``Trade, Technology, and Productivity: A Study of Brazilian Manufactures, 1986-1998'', University of California at San Diego, Economics Working Paper 2004-06

Muûls M. and M. Pisu, 2007, ``Imports and Exports at the Level of the Firm: Evidence from Belgium'', CEP Discussion Papers dp0801, Centre for Economic Performance, LSE

Olley, G. S. and A. Pakes, 1996, ``The Dynamics of Productivity in the Telecommunications Equipment Industry'', Econometrica, Vol. 64, No. 6., pp. 1263-1297.

Rivera-Batiz, L. and P., Romer, 1991, ``International trade with endogenous technological change'', European Economic Review, 35(4), 971--1001.

Roberts, M. J., and J. R. Tybout, 1997, ``The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs'', American Economic Review}, 87(4), 545--564.

Romer, P., 1987, ``Growth Based on Increasing Returns Due to Specialization'', American Economic Review, 77(2), 56--62.

Romer, P., 1990, ``Endogenous Technological Change'', \textit{Journal of Political Economy, 98(5), 71--102.

Serti, F., and C., Tomasi, 2008, ``Firm Heterogeneity: Do Destinations of Exports and Origins of Imports Matter?'', LEM Working Paper 2008-14.

Strauss-Kahn, V., 2004, ``The Role of Globalization in the Within-Industry Shift Away from Unskilled Workers in France'', in R. Baldwin and A. Winters, eds., Challenges to Globalization, Chicago: University of Chicago Press and NBER Working Paper 9716.

Theil, H., 1972, ``Statistical Decomposition Analysis'', North Holland.

Verhoogen, E., 2008, ``Trade, Quality Upgrading, and Wage Inequality in the Mexican Manufacturing Sector'', Quarterly Journal of Economics, 123(2), 489--530.

Yi, K.M., 2003, ``Can Vertical Specialization Explain the Growth of World Trade?'', Journal of Political Economic, 111, 52--102.