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Import Churning and Export Performance of Multi-product Firms

Authors


  • The paper has benefited from discussion with participants of the ISGEP 2011 workshop (University of Lüneburg), seminars at the University of Ljubljana and UC Louvain, as well as the EBR 2011 Conference (University of Ljubljana) and EITI 2012 Conference (Keio University, Tokyo). We are grateful to the Slovenian Statistical Office for allowing us to access and analyse confidential data on international trade transactions.

Abstract

This paper analyses the impact of churning in the imported varieties of capital and intermediate inputs on firm export scope and productivity. Using detailed data on imports and exports at the firm-product-market level, we document substantial churning in both imports and exports for Slovenian manufacturing firms in the period 1994–2008. On average, a firm changes about one-quarter of imported and exported product-markets every year, while gross churning in terms of added and dropped product-markets is almost three times higher. A substantial share of this product churning is due to simultaneous imports and exports of firms in identical varieties within the same CN-8 product code (so called pass-on-trade). We find that churning in imported varieties is far more important than reduction in tariffs or declines in import prices for firms’ productivity growth and increased export product scope. We also find gross churning has a bigger impact on firm productivity improvements by a factor of more than 10 in comparison with net churning. Both adding and dropping of imported input varieties thus seem to be of utmost importance for firms aiming to optimise their input mix towards their most valuable inputs. These effects are further enhanced when excluding simultaneous trade in identical varieties, suggesting that pass-on-trade has less favourable effects on firms’ long-run performance than regular trade.

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