IDEAS home Printed from https://ideas.repec.org/a/wly/iecrev/v66y2025i1p175-199.html
   My bibliography  Save this article

Inventories, Input Costs, And Productivity Gains From Trade Liberalizations

Author

Listed:
  • Shafaat Yar Khan
  • Armen Khederlarian

Abstract

Sourcing internationally allows firms to access cheaper or better inputs but increases logistical costs, particularly through higher inventory holdings. This article examines the productivity gains from trade liberalizations accounting for inventory costs—typically omitted from revenue‐based measures of productivity. In model simulations, we show that omitting these overestimates the effect of input tariffs on productivity and that controlling for inventories in the estimation of productivity corrects the bias. We document these facts during India's 1990s reforms. First, firms' inventories increase strongly with imports. Second, productivity gains drop by 20–50% once inventory costs are accounted for.

Suggested Citation

  • Shafaat Yar Khan & Armen Khederlarian, 2025. "Inventories, Input Costs, And Productivity Gains From Trade Liberalizations," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 66(1), pages 175-199, February.
    • Handle: RePEc:wly:iecrev:v:66:y:2025:i:1:p:175-199
    DOI: 10.1111/iere.12731
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/iere.12731
    Download Restriction: no
    File URL: https://libkey.io/10.1111/iere.12731?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:iecrev:v:66:y:2025:i:1:p:175-199. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/deupaus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.