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Private finance

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This paper studies the impact of input-trade liberalization on firms' decision to upgrade foreign technology embodied in imported capital goods. The empirical analysis is motivated by a simple theoretical framework of endogenous technology adoption, heterogeneous firms and imported inputs. The model predicts a positive effect of input tariff reductions on firms' technology choice to source capital goods from abroad. This effect is heterogeneous across firms depending on their initial productivity level. Relying on India's trade liberalization episode in the early 1990s, this paper demonstrates that the probability of importing capital goods is higher for firms producing in industries that have experienced greater cuts on tariffs on intermediate goods. Only those firms in the middle range of the initial productivity distribution have benefited from input-trade liberalization to upgrade their technology.

Firm Heterogeneity and Indian Firm-Level Data --- Firms' Decision To Import Capital Goods --- Input-Trade Liberalization

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We examine the gains from globalization in the presence of firm heterogeneity and potential resource misallocation. We show theoretically that without distortions, bilateral and export liberalizations increase aggregate welfare and productivity, while import liberalization has ambiguous effects. Resource misallocation can either amplify, dampen or reverse the gains from trade. Using model-consistent measures and unique new data on 14 European countries and 20 industries in 1998-2011, we empirically establish that exogenous shocks to export demand and import competition both generate large aggregate productivity gains. Guided by theory, we provide evidence consistent with these effects operating through reallocations across firms in the presence of distortions: (i) Both export and import expansion increase average firm productivity, but the former also shifts activity towards more productive firms, while the latter acts in reverse; (ii) Both export and import exposure raise the productivity threshold for survival, but this cut-off is not a sufficient statistic for aggregate productivity; (iii) Efficient institutions, factor and product markets amplify the gains from import competition but dampen those from export access.

Exports and Imports --- Finance: General --- Production and Operations Management --- Trade: General --- Empirical Studies of Trade --- Economic Growth of Open Economies --- Globalization: Macroeconomic Impacts --- Development Planning and Policy: Trade Policy --- Factor Movement --- Foreign Exchange Policy --- Economic Growth and Aggregate Productivity: General --- Measurement of Economic Growth --- Aggregate Productivity --- Cross-Country Output Convergence --- Macroeconomics: Production --- Trade Policy --- International Trade Organizations --- General Financial Markets: General (includes Measurement and Data) --- Macroeconomics --- International economics --- Finance --- Productivity --- Exports --- Imports --- Trade liberalization --- Competition --- Production --- International trade --- Financial markets --- Industrial productivity --- Commercial policy --- China, People's Republic of

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Foreign trade. International trade