Working Paper: CEPR ID: DP7218
Authors: Patricia Augier; Olivier Cadot; Marion Dovis
Abstract: This paper estimates the effect of the decision to import intermediate goods and capital equipment on Total Factor Productivity (TFP) at the firm level on a panel of Spanish firms covering the period between 1991 and 2002. We use two alternative approaches. In the first, we estimate TFP using the Olley-Pakes semi-parametric method and apply a diff-in-diff estimator with a control group constructed by propensity-score matching. In the second, direct method, we estimate TFP with imported inputs as a state variable in one stage. Both approaches show that the effect of a firm?s decision to source intermediates and capital equipment abroad on its TFP depends critically on its capacity to absorb technology, measured by the proportion of skilled labor. This provides indirect evidence that imported capital equipment may embody new or different technologies that require adaptation at which some firms are better than others. If skilled labor proxies for adaptability, it is how firms adapt their production processes to the foreign inputs that seems to determine whether or not they benefit from them.
Keywords: absorptive capacity; imports; Olley-Pakes; TFP
JEL Codes: F2; O1; O2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Proportion of skilled labor (J24) | Absorptive capacity of firms (D25) |
| Absorptive capacity of firms (D25) | Productivity effects of imports (F14) |
| Firm characteristics (skilled labor and R&D intensity) interacted with importing status (F23) | TFP (F16) |
| Decision to import intermediates and capital equipment (F10) | TFP (F16) |
| Ten-percentage point increase in the share of imports in total intermediates and capital goods purchases (F10) | TFP (F16) |