Imported Intermediate Inputs and Domestic Product Growth: Evidence from India

42 Pages Posted: 23 Oct 2008 Last revised: 25 Sep 2009

See all articles by Pinelopi Koujianou Goldberg

Pinelopi Koujianou Goldberg

Princeton University; National Bureau of Economic Research (NBER)

Amit Khandelwal

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER); Bureau for Research and Economic Analysis of Development (BREAD)

Nina Pavcnik

Dartmouth College - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Petia B. Topalova

International Monetary Fund (IMF)

Date Written: October 2008

Abstract

New goods play a central role in many trade and growth models. We use detailed trade and firm-level data from a large developing economy--India--to investigate the relationship between declines in trade costs, the imports of intermediate inputs and domestic firm product scope. We estimate substantial static gains from trade through access to new imported inputs. Accounting for new imported varieties lowers the import price index for intermediate goods on average by an additional 4.7 percent per year relative to conventional gains through lower prices of existing imports. Moreover, we find that lower input tariffs account on average for 31 percent of the new products introduced by domestic firms, which implies potentially large dynamic gains from trade. This expansion in firms' product scope is driven to a large extent by international trade increasing access of firms to new input varieties rather than by simply making existing imported inputs cheaper. Hence, our findings suggest that an important consequence of the input tariff liberalization was to relax technological constraints through firms' access to new imported inputs that were unavailable prior to the liberalization.

Suggested Citation

Goldberg, Pinelopi Koujianou and Khandelwal, Amit Kumar and Pavcnik, Nina and Topalova, Petia B., Imported Intermediate Inputs and Domestic Product Growth: Evidence from India (October 2008). NBER Working Paper No. w14416. Available at SSRN: https://ssrn.com/abstract=1288415

Pinelopi Koujianou Goldberg (Contact Author)

Princeton University ( email )

22 Chambers Street
Princeton, NJ 08544-0708
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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Amit Kumar Khandelwal

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States

HOME PAGE: http://www0.gsb.columbia.edu/faculty/akhandelwal/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

HOME PAGE: http://www.nber.org/people/amit_khandelwal

Bureau for Research and Economic Analysis of Development (BREAD) ( email )

Duke University
Durham, NC 90097
United States

Nina Pavcnik

Dartmouth College - Department of Economics ( email )

6106 Rockefeller Hall
Hanover, NH 03755
United States
603-646-2537 (Phone)
603-646-2122 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Petia B. Topalova

International Monetary Fund (IMF) ( email )

700 19th Street N.W.
Washington, DC 20431
United States

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