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American Economic Review Vol. 105 No. 12 2015

Imported Inputs and Productivity

László Halpern1; Miklós Koren2; Adam Szeidl3

1 Institute of Economics, Hungarian Academy of Sciences, Budaörsi út 45, Budapest 1112, Hungary, and CEPR (e-mail: ) · 2 Central European University, Nádor utca 9, Budapest 1051, Hungary, IEHAS, and CEPR (e-mail: ) · 3 Central European University, Nádor utca 9, Budapest 1051, Hungary, and CEPR (e-mail: )

Abstract

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.

DOI
10.1257/aer.20150443
Volume
105
Issue
12
Pages
3660-3703
Language
en
Sources
openalex bibtex:phds-export.bib crossref

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