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Static and dynamic gains from costly importing of intermediate inputs: Evidence from Colombia

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  • Zhang, Hongsong

Abstract

This paper investigates the long-term effect of importing intermediate inputs on firm revenue and productivity, by estimating a dynamic model of firms' endogenous importing decisions with random sunk and fixed costs of importing. Based on counterfactual analysis, the model decomposes the gains from importing into a static revenue effect, resulting from improved quality and variety of available inputs, and a dynamic productivity effect, resulting from improved productivity. Empirical results from a Colombian plant-level dataset show that both the static and dynamic effects are important sources of gains from importing. It is also shown that the two types of trade liberalization, either by reducing the import tariff or by reducing sunk and fixed costs of import, both have a substantial impact on firm value.

Suggested Citation

  • Zhang, Hongsong, 2017. "Static and dynamic gains from costly importing of intermediate inputs: Evidence from Colombia," European Economic Review, Elsevier, vol. 91(C), pages 118-145.
    • Handle: RePEc:eee:eecrev:v:91:y:2017:i:c:p:118-145
    DOI: 10.1016/j.euroecorev.2016.09.013
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    Cited by:

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    2. Segundo Camino-Mogro & Mary Armijos & Paul Vera-Gilces, 2022. "High-growth firms and international trade: evidence from Ecuador," Journal of Evolutionary Economics, Springer, vol. 32(1), pages 299-332, January.
    3. Michele Imbruno, 2019. "Importing under trade policy uncertainty: Evidence from China," Post-Print hal-02171715, HAL.
    4. Emir Malikov & Shunan Zhao & Jingfang Zhang, 2024. "A System Approach to Structural Identification of Production Functions with Multi-Dimensional Productivity," Advances in Econometrics, in: Essays in Honor of Subal Kumbhakar, volume 46, pages 211-263, Emerald Group Publishing Limited.
    5. Imbruno, Michele, 2019. "Importing under trade policy uncertainty: Evidence from China," Journal of Comparative Economics, Elsevier, vol. 47(4), pages 806-826.
    6. Paul L. E. Grieco & Shengyu Li & Hongsong Zhang, 2022. "Input prices, productivity, and trade dynamics: long‐run effects of liberalization on Chinese paint manufacturers," RAND Journal of Economics, RAND Corporation, vol. 53(3), pages 516-560, September.
    7. Bernabe Lopez‐Martin, 2022. "Firm Export Dynamics And The Exchange Rate: A Quantitative Exploration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 63(3), pages 1137-1163, August.
    8. Mo, Jiawei & Qiu, Larry D. & Zhang, Hongsong & Dong, Xiaoyu, 2021. "What you import matters for productivity growth: Experience from Chinese manufacturing firms," Journal of Development Economics, Elsevier, vol. 152(C).
    9. Zhang, Hongsong, 2019. "Non-neutral technology, firm heterogeneity, and labor demand," Journal of Development Economics, Elsevier, vol. 140(C), pages 145-168.
    10. Segundo Camino-Mogro & Paul Carrillo-Maldonado & Alberto López, 2021. "Imports, productivity and substitutability between intermediate inputs: a quantile regressions approach," Economics Bulletin, AccessEcon, vol. 41(2), pages 702-709.
    11. Fei Jia & Minjie Huang & Shunan Zhao, 2024. "Estimation of endogenous firm productivity without instruments: an application to foreign investment," Journal of Productivity Analysis, Springer, vol. 61(2), pages 135-155, April.

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    More about this item

    Keywords

    Import Intermediate Inputs; Productivity; Firm Value; Static Effect; Dynamic Effect;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F2 - International Economics - - International Factor Movements and International Business

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