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Trade, Foreign Inputs and Firms’ Decisions: Theory and Evidence

Maria Bas

Working Papers from CEPII research center

Abstract: We investigate the effect of different channels through which input trade liberalization affects firms’ export decisions. We develop a trade model with heterogeneous firms and sectors of varying imported input intensity that reproduces different mechanisms through which the access to foreign inputs affects the performance of domestic firms. In industries with lower input tariffs (or more intensive in imported intermediate goods), more firms become exporters and export larger volumes. The effect of firm productivity on export status and export sales is greater for firms producing in these industries. The export selection process is reinforced by the access to foreign inputs. We provide strong empirical evidence in support of these theoretical predictions based on plant-level panel data from Argentina (1992-2001) and Chile (1990-1999). Our findings suggest that the impact of firm productivity on the probability of exporting and on the volume of exports is more pronounced for firms producing in industries that have a greater access to foreign inputs.

Keywords: FIRM HETEROGENEITY; INPUT TRADE LIBERALIZATION; FOREIGN INTERMEDIATE GOODS; FIRM PRODUCTIVITY AND PLANT PANEL DATA (search for similar items in EconPapers)
JEL-codes: F10 F12 F41 (search for similar items in EconPapers)
Date: 2009-12
New Economics Papers: this item is included in nep-cwa and nep-int
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