Use of imported inputs and the cost of importing: evidence from developing countries

Abstract

For a representative sample of manufacturing firms in 26 countries, the article shows that changes in the cost of importing over time is significantly and negatively correlated with changes in the percentage of firm’s material inputs that are of foreign origin. Furthermore, we show that there may be a non-linear relationship between import costs and imports. These findings are important as recent studies point towards a significant positive effect of imported inputs on productivity and growth. We hope that the present article inspires more work on the determinants of imported input usage especially in developing countries.

Keywords:

• imports
• trade barriers
• cost of importing
• trade policy

JEL Classification:

• F14
• F16
• O14
• O57

Notes

¹ For a literature review, see for example Wagner (2012).

² For each country in our sample, data are available for two rounds conducted at two different points of time. For the first round, data were collected in 2004 for 11 countries, 2005 for 11 countries and 2006 for 4 countries. The second round was conducted in 2008 for 11 countries, 2009 for 11 countries, 2010 for 3 countries and 2011 for 1 country.