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DT 03/19 - Revisiting the role of Imported intermediates on Productivity: A firm-level analysis for UruguayISSN/ISBN: 1688-5090
Author/s: Blanchard, Pablo, Peluffo, Adriana , Zaclicever, Dayna
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International trade is considered a vehicle for technology diffusion, which in turn can induce productivity growth. Particularly, imports may give domestic firms access to a larger variety and/or better quality of intermediate or capital inputs in which new technologies are embodied. However, the lack of sufficiently skilled labor, an issue especially relevant for small developing countries, may prevent firms from taking advantage of these technologies. Using a panel of Uruguayan manufacturing firms for the period 1997-2008, we explore the impact of imported inputs on firms’ productivity and evaluate whether the effect is mediated by the firm’s absorptive capacity, proxied by the proportion of skilled labor. We use two alternative approaches. Firstly, we apply a two-stage approach by first estimating firms’ productivity and then using impact evaluation techniques to analyze causality between imported inputs and productivity. Secondly, we use a direct approach, estimating TFP with imported inputs as a state variable. Our results show that imported intermediates have an enhancing effect on Uruguayan firms’ productivity, and that absorptive capacity plays an important role on this effect. |