Importing and Exporting

FACUNDO ALBORNOZ

Londres

Seminario; External Seminar; 2015

European Bank of Development and Reconstruction

In this paper, we uncover a novel fact about the relationship between exporting and importing. Using a comprehensive database of Argentine firms, we find that exporting to a new destination increases the probability of a firm beginning to import from that market within the lapse of one year. We develop a standard model of import behavior and, by testing its predictions, we rule out productivity as an explanation and argue that export entry reduces import fixed costs. We show that the effect is stronger in distant markets and when importing involves non-homogenous and rarely imported goods. Taken together, our results suggest that firms gain knowledge on -or establish links with- potential suppliers after export entry, which reduces the costs associated with searching for import sources.