Import Penetration, Intermediate Inputs and Productivity: Evidence from Italian Firms

Abstract

We test the impact of import penetration on the productivity of a sample of roughly 35,000 Italian manufacturing firms operating in the period 1996-2003, considering the impact on productivity of both import penetration in the same industry and import penetration in the up-stream industries. We also distinguish the source country of imports.

We find that: 1) import penetration has a positive effect on productivity. 2) The effects are much larger for import penetration in up-stream industries than for import penetration in the same industry. 3) Imports from the other European countries and the BRICS have more significant impact on the productivity of Italian firms than imports from the US.

Keywords: Import Penetration, Intermediate Inputs, Productivity

JEL Classification: F14, F61