Imports, supply chains and firm productivity

Carol Newman, John Rand and Finn Tarp

World Development, 2023, vol. 172, issue C

Abstract: This paper explores how competition-induced productivity gains from imports in intermediate producing sectors transmit through the supply chain. Based on firm-level panel data from Vietnam, we show that in addition to the productivity premium associated with importing intermediate inputs, firms that use domestically-produced inputs from more import-intensive sectors also have higher productivity. We find evidence that import competition leads to product differentiation, in particular higher quality output in sectors where there is greater scope for quality variation, leading to better quality domestically-produced inputs. We also find evidence that non-importing firms that experience productivity gains due to greater import intensity in upstream sectors change their input mix and become more capital intensive. We conclude that ignoring the gains from trade through this mechanism may significantly underestimate the impact of trade on productivity.

Keywords: Imports; Supply chains; Productivity; Vietnam (search for similar items in EconPapers)
JEL-codes: D22 F13 F14 F61 F63 L60 O12 O53 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: Imports, supply chains, and firm productivity (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:wdevel:v:172:y:2023:i:c:s0305750x23001894

DOI: 10.1016/j.worlddev.2023.106371

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