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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.

This paper examines the relationship between the destination of exports and the input prices paid by firms, using detailed customs and firm-product-level data from Portugal. Both ordinary least squares regressions and an instrumental-variable strategy using exchange-rate movements (interacted with indicators for initial exports) as a source of variation in destinations indicate that exporting to richer countries leads firms to pay higher prices for inputs, other things equal. The results are supportive of what we call the income-based quality-choice channel: selling to richer destinations leads firms to raise the average quality of goods they produce and to purchase higher-quality inputs.

We build into a Ricardian model sectoral linkages, trade in intermediate goods, and sectoral heterogeneity in production to quantify the trade and welfare effects from tariff changes. We also propose a new method to estimate sectoral trade elasticities consistent with any trade model that delivers a multiplicative gravity equation. We apply our model and use our estimated elasticities to identify the impact of NAFTA's tariff reductions. We find that Mexico's welfare increases by 1.31%, U.S.'s welfare increases by 0.08%, and Canada's welfare declines by 0.06%. We find that intra-bloc trade increases by 118% for Mexico, 11% for Canada, and 41% for the U. S. We show that welfare effects from tariff reductions are reduced when the structure of production does not take into account intermediate goods or input-output linkages. Our results highlight the importance of sectoral heterogeneity, intermediate goods, and sectoral linkages for the quantification of the welfare gains from tariffs reductions.

This article explores how reductions in tariffs on imported inputs and final goods affect the productivity of large Chinese trading firms, with the special tariff treatment that processing firms receive on imported inputs. Firm-level input and output tariffs are constructed. Both types of tariff reductions have positive impacts on productivity that are weaker as firms' share of processing imports grows. The impact of input tariff reductions on productivity improvement, overall, is weaker than that of output tariff reductions, although the opposite is true for non-processing firms only. Both tariff reductions are found to contribute at least 14.5% to economy-wide productivity growth.

We propose two distinct approaches to the measurement of industry upstreamness (or average distance from final use) and show that they yield an equivalent measure. Furthermore, we provide two additional interpretations of this measure, one of them related to the concept of forward linkages. We construct this measure for 426 industries using the 2002 US input-output Tables. We also construct our measure using data from selected countries in the OECD STAN database. Finally, we present an application of our measure that explores the determinants of the average upstreamness of exports at the country level using trade flows for 2002.

Recent decades have witnessed a surge of trade in intermediate goods and a proliferation of free trade agreements (FTAs). FTAs use rules of origin (RoO) to distinguish goods originating from member countries from those originating from third countries. We focus on the North American Free Trade Agreement (NAFTA), the world’s largest FTA, and construct a unique dataset that allows us to map the input-output linkages in its RoO. Exploiting cross-product and cross-country variation in treatment over time, we show that NAFTA RoO led to a sizable reduction in imports of intermediate goods from third countries relative to NAFTA partners.

We study how changes in energy input costs for US manufacturers affect the relative welfare of manufacturing producers and consumers (i.e., incidence). We also develop a methodology to estimate the incidence of input taxes that accounts for incomplete pass-through, imperfect competition, and substitution among inputs. For the several industries we study, 70 percent of energy price-driven changes in input costs get passed through to consumers in the short to medium run. The share of the welfare cost that consumers bear is 25–75 percent smaller (and the share producers bear is larger) than models featuring complete pass-through and perfect competition would suggest.

New goods play a central role in many trade and growth models. We use detailed trade and firm-level data from India to investigate the relationship between declines in trade costs, imports of intermediate inputs, and domestic firm product scope. We estimate substantial gains from trade through access to new imported inputs. Moreover, we find that lower input tariffs account on average for 31% of the new products introduced by domestic firms. This effect is driven to a large extent by increased firm access to new input varieties that were unavailable prior to the trade liberalization.

Large multi-product firms dominate international trade flows. Using novel linked production and export data at the firm-product level, we find that the overwhelming majority of manufacturing firms export products that they do not produce. Three quarters of the exported products and 30% of export value from Belgian manufacturers are in goods that are not produced by the firm, so-called Carry-Along Trade (CAT). The number of CAT products is strongly increasing in firm productivity while the number of produced products that are exported is weakly increasing in firm productivity. We propose a general model of production and sourcing at multi-product firms and explore new demand- and supply-side modelling features capable of generating predictions consistent with the empirical findings. Export price data and company interviews offer suggestive evidence for the presence of demand-scope complementarities.

This paper studies the impact of an R&D cost shock on R&D investments, imported inputs, and their joint impact on firm performance. We introduce imported inputs into a model of R&D and endogenous productivity, and show that R&D and international sourcing are complementary activities. Exploiting the introduction of an R&D tax credit in Norway in 2002, we find that cheaper R&D stimulated not only R&D investments but also imports of intermediates, quantitatively consistent with the model. An implication of our work is that improved access to imported inputs promotes R&D investments and, ultimately, technological change.