Local and sectoral import spillovers in Sweden

In this paper I investigate the relevance and explore the nature of import spillovers on the firms' decision to start importing using an exceptionally detailed data set on Swedish firms' imports, at the product-level and by source-country, spanning the period between 1997 and 2011. I study whether the presence of established importers located in the same area and/or operating in the same industry influences the import behavior of individual firms. The import side of trade has received relatively less attention in the literature and this tendency carries over to the study of spillovers that have mainly been researched from the exporters' perspective. There are however reasons to believe that import spillovers are indeed a relevant phenomenon. This paper bridges the gap in the literature and further contributes to the understanding of import spillovers by laying out a theoretical framework that formalizes the main forces at play. I develop a model for firms' import decisions featuring heterogeneous firms, product and country specific fixed costs of sourcing while additionally accommodating spillovers. To the best of my knowledge, this is one of only a handful of papers to study spillovers for import activities, and the first to provide theoretical insights for this mechanism.