Imported Inputs and Productivity

We estimate a model of importers in Hungarian microdata and conduct counterfactual analysis to investigate the effect of imported inputs on productivity. We find that importing all input varieties would increase a firm's revenue productivity by 22 percent, about one-half of which is due to impe...

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Bibliographic Details
Published in:The American economic review 2015-12, Vol.105 (12), p.3660-3703
Main Authors: Halpern, László, Koren, Miklós, Szeidl, Adam
Format: Article
Language:English
Subjects:
Cost estimates
Fixed costs
Importers
Imports
Industrial productivity
International economics
International trade
Productivity
Revenue
Tariffs
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Summary:We estimate a model of importers in Hungarian microdata and conduct counterfactual analysis to investigate the effect of imported inputs on productivity. We find that importing all input varieties would increase a firm's revenue productivity by 22 percent, about one-half of which is due to imperfect substitution between foreign and domestic inputs. Foreign firms use imports more effectively and pay lower fixed import costs. We attribute one-quarter of Hungarian productivity growth during the 1993-2002 period to imported inputs. Simulations show that the productivity gain from a tariff cut is larger when the economy has many importers and many foreign firms.
ISSN:0002-8282
DOI:10.1257/aer.20150443