Rethinking the import-productivity nexus for Italian manufacturing

Abstract

We provide evidence on the firm level productivity effects of imports of intermediates. By exploiting a large panel of Italian manufacturing firms, we are able to separately explore the role of importing from high and low income countries. Importing does not permanently affect the firm productivity growth. This finding holds both when we test for the import entry by means of Propensity Score Matching techniques and when we analyse the import intensity within a dynamic panel data model framework. On the contrary, we confirm the existence of self-selection into importing. Also, our evidence supports the learning-by-exporting effects in Italian manufacturing and we prove that this result is robust to the control of firm import activity.

Appendices

Appendix 1: Variables definition and description

• tfp: total factor productivity. Throughout the paper the latter is computed following Caves et al. (1982) ²⁰ as:

  $$ \begin{aligned} ln TFP_{ft} &=ln Y_{ft} -\bar{ln Y_{t}}+\sum_{s=2}^{t} (\bar{lnY_{s}}-\bar{lnY_{s-1}})\\ & \quad -\frac{1}{2}\sum_{i=1}^{n}(S_{fit}+\bar{S_{it}})(lnX_{fit}-\bar{lnX_{it}}) + \frac{1}{2}\sum_{s=2}^{t}\sum_{i=1}^{n}(\bar{S_{is}}+\bar{S}{_{is-1}})(\bar{lnX_{is}}-\bar{lnX_{is-1}}) \end{aligned} $$

  (A.1)

  with Y and X respectively measuring real value added and the quantities of the n = 2 primary factors of production, i.e. labour and capital.²¹ S refers to the expenditure share of each factor and the bar indicates the average over the relevant quantity. We define a hypothetical firm having input cost shares equal to the arithmetic mean cost shares over all observations, and with input and output levels equal to the geometric mean of inputs and output over all observations. The terms in the first sum describe the difference between the firm f and the hypothetical firm at time t, while the terms in the second sums chain together the hypothetical firms back to the base period. The index measure the productivity in each year relative to a hypothetical firm that represents the average firm in the sector in the first year of our sample time span.

• tfp ^s: total factor productivity based on real sales. Throughout the paper the latter is computed following Caves et al. (1982) as:

  $$ \begin{aligned} ln TFP^{s}_{ft} &= ln Y_{ft} -\bar{ln Y_{t}}+\sum_{s=2}^{t} (\bar{lnY_{s}}-\bar{lnY_{s-1}})\\ & \quad -\frac{1}{2}\sum_{i=1}^{n}(S_{fit}+\bar{S_{it}})(lnX_{fit}-\bar{lnX_{it}}) + \frac{1}{2}\sum_{s=2}^{t}\sum_{i=1}^{n}(\bar{S_{is}}+\bar{S}{_{is-1}})(\bar{lnX_{is}}-\bar{lnX_{is-1}}) \end{aligned} $$

  (A.2)

  This index depart from the one above since it rests on the output specification of the production function, where Y measures the real output and X denotes the quantities of the n = 3 primary factors of production, i.e. labour, capital and the sum of intermediate material and service purchases. S refers to the expenditure share of each factor and the bar indicates the average over the relevant quantity.

• va: logarithm of the firm real value added;

• lp: labour productivity, measured as the logarithm of the firm real value added over firm total employment;

• Imp ^LI: import status from low income economies, measured as a dummy variable taking value 1 if the firm imports from low income countries and 0 otherwise;

• Imp ^HI: import status from high income economies, measured as a dummy variable taking value 1 if the firm imports from high income countries and 0 otherwise;

• ImpSh ^LI: import intensity from low income economies, measured as the share of imported inputs from low income countries over total output;

• ImpSh ^HI: import intensity from high income economies, measured as the share of imported inputs from high income countries over total output;

• Exp: export status, measured as a dummy variable taking value 1 if the firm exports;

• ExpSh: export intensity, measured as the value of total exports over total output;

• wage: average wage, logarithm of total labour cost over total employment;

• kl: capital labour ratio, measured as the logarithm of the ratio between the firm real material assets and the firm total employment;

• MatSh _dom : firm level intensity in domestic materials, measured as the share of material inputs purchased domestically over total material purchases;

• lab: size, measured as the logarithm of firm employment;

• k _int : intangible capital stock, measured as the logarithm of the firm real intangible assets;

• imp_pen _sect : sector level import penetration, measured as the three digit level sector imports over the summation of the total three digit level sector output and imports minus exports;

• exp_open _sect : sector level export openness, measured as the three digit level sector exports over total sectoral output;

• skill _sect : sector level skill ratio, measured as the ratio between the three digit level sector share of white collars over total sectoral employment.

Appendix 2: Additional graphs and tables

Fig. 1

Productivity—Kernel density

Fig. 2

Propensity score—Kernel density

Table 9 Descriptive statistics

Table 10 Balancing tests