 Intermediate Inputs and the Export Gravity EquationAntonio Navas (), Francesco Serti and Chiara Tomasi () No 2013014, Working Papers from The University of Sheffield, Department of Economics Abstract: This paper introduces imports in intermediate inputs into a standard heterogeneous firms model of trade with asymmetric countries. The model highlights how imports from a specific country affects a firm's decision to export to that country (the extensive margin), as well as its export value (the intensive margin). The model shows that the effect of both distance and market size on the export margins is magnified when imports in intermediates are accounted for. Indeed, to the extent that exporting firms also use foreign intermediate inputs, the impact of traditional gravity forces on exports also depends on import activities. Exploiting data on product-destination level transactions of a large panel of Italian firms, the paper provides empirical evidence in support of the predictions of the model. Controlling for firm-level time-varying unobserved heterogeneity and for the potential endogeneity of firm-level import decisions, the empirical analyses confirm that the estimated elasticities of exports to distance and market size depend on firms' importing activities. Keywords: imports; exports; firm heterogeneity; gravity equation (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:shf:wpaper:2013014 Access Statistics for this paper More papers in Working Papers from The University of Sheffield, Department of Economics Contact information at EDIRC. |
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