Does Input-Trade Liberalization Affect Firms' Foreign Technology Choice?
This paper studies the impact of input-trade liberalization on firms' decision to upgrade foreign technology embodied in imported capital goods. The empirical analysis is motivated by a simple theoretical framework of endogenous technology ado...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2016
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/889161478534043136/Does-input-trade-liberalization-affect-firms-foreign-technology-choice http://hdl.handle.net/10986/25683 |
| Summary: | This paper studies the impact of
input-trade liberalization on firms' decision to
upgrade foreign technology embodied in imported capital
goods. The empirical analysis is motivated by a simple
theoretical framework of endogenous technology adoption,
heterogeneous firms and imported inputs. The model predicts
a positive effect of input tariff reductions on firms'
technology choice to source capital goods from abroad. This
effect is heterogeneous across firms depending on their
initial productivity level. Relying on India's trade
liberalization episode in the early 1990s, this paper
demonstrates that the probability of importing capital goods
is higher for firms producing in industries that have
experienced greater cuts on tariffs on intermediate goods.
Only those firms in the middle range of the initial
productivity distribution have benefited from input-trade
liberalization to upgrade their technology. |
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