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The Role of Imported Inputs in Firms’ Productivity and Exports

Author

Listed:
  • Deasy D.P. Pane
  • Arianto A. Patunru
Abstract
The rise of economic protectionism worldwide has come with re-emergence of mercantilist policies whereby governments push for exports while restricting imports. Against this populist approach, we show that importing inputs can raise productivity and export. Using firm-level data matched with very detailed customs data of Indonesia’s exports and imports during 2008–12, we apply instrumental variable strategy with import tariffs and import weighted real exchange rates as instruments for import of intermediate inputs. We find causality from imported inputs to productivity increase and export growth. Higher access to input varieties has a larger impact than an increase in import volume on export, implying that the main benefits of importing may come from access to broader alternatives of inputs. Furthermore, the impact is also larger when imports originate from developed countries, suggestive of a positive effect of technology and product quality.

Suggested Citation

  • Deasy D.P. Pane & Arianto A. Patunru, 2020. "The Role of Imported Inputs in Firms’ Productivity and Exports," Departmental Working Papers 2020-08, The Australian National University, Arndt-Corden Department of Economics.
    • Handle: RePEc:pas:papers:2020-08
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    File URL: https://acde.crawford.anu.edu.au/sites/default/files/publication/acde_crawford_anu_edu_au/2020-11/acde_td_wp_pane-patunru_2020_81.pdf
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    More about this item

    Keywords

    imported intermediate inputs; export performance; total factor productivity;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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