{"title":"Using Imported Intermediate Goods: Selection and Technology Effects","authors":"M. Gibson, Tim A. Graciano","doi":"10.1111/roie.12325","DOIUrl":null,"url":null,"abstract":"Producers that use imported intermediate goods tend to be much larger and more productive than others. Some of this is due to a selection effect: the most productive producers self‐select into importing because only they can overcome the fixed costs of developing trade relationships with foreign input suppliers. Some of this is due to a technology effect: any given producer would have higher variable profits from operating the technology using imported intermediate goods. To account for the roles of these theoretical mechanisms, we develop a simple model of a competitive small open economy in which heterogeneous firms endogenously decide whether to use imported intermediate goods. The technology that uses imported intermediate goods is superior but requires a higher fixed cost of operating. The calibrated model captures the large performance advantage of importers and quantifies the selection and technology effects.","PeriodicalId":197385,"journal":{"name":"PSN: Import/Export Strategies (Topic)","volume":null,"pages":null},"PeriodicalIF":0.0000,"publicationDate":"2018-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"3","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"PSN: Import/Export Strategies (Topic)","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.1111/roie.12325","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
引用次数: 3
Abstract
Producers that use imported intermediate goods tend to be much larger and more productive than others. Some of this is due to a selection effect: the most productive producers self‐select into importing because only they can overcome the fixed costs of developing trade relationships with foreign input suppliers. Some of this is due to a technology effect: any given producer would have higher variable profits from operating the technology using imported intermediate goods. To account for the roles of these theoretical mechanisms, we develop a simple model of a competitive small open economy in which heterogeneous firms endogenously decide whether to use imported intermediate goods. The technology that uses imported intermediate goods is superior but requires a higher fixed cost of operating. The calibrated model captures the large performance advantage of importers and quantifies the selection and technology effects.