Importing after Exporting

FACUNDO ALBORNOZ; EZEQUIEL GARCÍA LEMBERGMEN

Londres

Workshop; CEP-LSE International Workshop; 2014

London School of Economics

In this paper, we use a comprehensive database of Argentinean rms for the period 2003-2008 in order to study different dimensions of import behavior. First, we develop a model of import behavior that yields predictions about how fixed costs and productivity affect import decisions. While the literature focus mainly on the intensive margin of importing or limits the extensive margin to only one possible foreign source, we do not only study both the intensive and extensive margins but also highlight the determinants of changes in the sourcing strategy considering from where the firm sources each of its imported inputs. Second, by testing the predictions of the theoretical model, we find a strong association between exporting and importing costs. In particular, we uncover a novel fact about importing and its relationship with exporting: exporting to a new destination raises the probability for a firm to begin importing from that specific country within the following year. Furthermore, by performing different tests, our findings suggest that the mechanism behind the main results is the reduction of search costs that exporting to a specfic country implies.