The Role of Imported Inputs in Firms’ Productivity and Exports

Deasy D.P. Pane and Arianto Patunru

Departmental Working Papers from The Australian National University, Arndt-Corden Department of Economics

Abstract: The rise of economic protectionism worldwide has come with re-emergence of mercantilist policies whereby governments push for exports while restricting imports. Against this populist approach, we show that importing inputs can raise productivity and export. Using firm-level data matched with very detailed customs data of Indonesia’s exports and imports during 2008–12, we apply instrumental variable strategy with import tariffs and import weighted real exchange rates as instruments for import of intermediate inputs. We find causality from imported inputs to productivity increase and export growth. Higher access to input varieties has a larger impact than an increase in import volume on export, implying that the main benefits of importing may come from access to broader alternatives of inputs. Furthermore, the impact is also larger when imports originate from developed countries, suggestive of a positive effect of technology and product quality.

Keywords: imported intermediate inputs; export performance; total factor productivity (search for similar items in EconPapers)
JEL-codes: D22 D24 F13 F14 F31 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2020
New Economics Papers: this item is included in nep-bec, nep-eff, nep-int and nep-sea
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Persistent link: https://EconPapers.repec.org/RePEc:pas:papers:2020-08

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