New Imported Inputs, New Domestic Products

57 Pages Posted: 27 Sep 2011

See all articles by Italo Colantone

Italo Colantone

Bocconi University

Rosario Crinò

Catholic University of Milan

Date Written: September 1, 2011

Abstract

We study the effects of new imported inputs on the entry of new domestic products and their characteristics. To this purpose, we construct a novel, comprehensive and extremely detailed dataset, which contains product-level information on foreign trade and domestic production for 25 EU countries over 1995-2007. Using these data, we identify new domestic goods and new imported inputs, controlling for all changes in commodity classifications over time. We then show that new imported inputs substantially boost the introduction of new domestic products. We also show that this effect is directly proportional to the quality of new imported inputs and inversely related to their price (conditional on quality). Finally, we document that new products are characterized by higher prices and higher quality relative to existing goods, and that such premia are larger the greater is the use of new imported inputs in production.

Keywords: New Intermediate Inputs, Product Innovation, Input and Output Prices, Input and Output Quality, Product-level data

JEL Classification: F1

Suggested Citation

Colantone, Italo and Crinò, Rosario, New Imported Inputs, New Domestic Products (September 1, 2011). Centro Studi Luca d'Agliano Development Studies Working Paper No. 312. Available at SSRN: https://ssrn.com/abstract=1933788 or http://dx.doi.org/10.2139/ssrn.1933788

Italo Colantone (Contact Author)

Bocconi University ( email )

Via Sarfatti, 25
Milan, MI 20136
Italy

Rosario Crinò

Catholic University of Milan ( email )

1 Largo A. Gemelli
Milano (Milan), MI Milano 20123
Italy

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