What You Import Matters

ABSTRACT

This study examines whether the type of imported good affects manufacturing upgrading. Based on city-level data for China from 2003 to 2013, we show that the expansion of imports significantly promotes the upgrading of the manufacturing industry. Parts imports, capital goods imports, and consumer goods imports are positively associated with manufacturing upgrading, while primary goods imports have a negative impact. The mechanism test shows that technology improvement and consumption expansion are important channels. The regression results at the disaggregated industry level further confirm these channels.

KEYWORDS:

• Import structure
• manufacturing upgrading
• technological improvement

JEL:

• F14
• L6
• R11

Disclosure Statement

No potential conflict of interest was reported by the authors.

Supplementary Material

Supplemental data for this article can be accessed online at https://doi.org/10.1080/1540496X.2023.2181070

Notes

1. Our sample period is 2003–2013 given the restricted data availability. However, our research is still relevant and meaningful for two reasons. First, the dataset in this period is still widely used in current research (Erten and Leight 2021; Feng, Wang, and Zhao 2022; Liu and Ma 2023). Second, 2003–2013 happens to be the period of China’s trade surged, which provides an excellent observation period.

2. In this study, cities at the 25^th percentile are defined as low-level consumption cities, and cities at the 75^th percentile are defined as high-level consumption cities.

3. See Appendix D for the list of selected urban agglomerations.

4. Since the data on the gross industrial output value and the corresponding number of employees at the city level are only available for 2003–2010, the sample interval in columns (1)–(3) of Table 4 is from 2003 to 2010.

5. The indicator of financial development level Finance is the ratio of the balance of deposits and loans to urban GDP, and the indicator of human capital Human is the logarithm of the number of college students per thousand people.

6. The random effect instrumental variable method cannot test the validity of instrumental variables, which is regrettable. Considering that the practice of using distance to the nearest port as an instrumental variable for imports is common, we think the approach is feasible.

Additional information

Funding

Supported by the Fundamental Research Funds for the Central Universities, Huazhong University of Science and Technology Double First-Class Funds for Humanities and Social Sciences HUST: No.2021WKYXQN015.