Import Intensity and Firm Productivity - An Empirical Analysis Based on Swedish Firm-Level Data

Abstract: Most exporting firms in the world also import foreign inputs in production. Recent findings elucidate the importance of imports as a driver of firm productivity on the amount of goods exported. This study aims at investigating the correlation between imports and firm productivity, not the causality. It will add to previous research by shifting focus from import participation to import intensity and outline if trading firms may increase their import intensity to gain productivity effects. Based on a firm-level survey in the Swedish manufacturing sector during 2014, a (Pseudo) Poisson Maximum Likelihood estimator is used in the empirical analysis. We find a positive correlation between import intensity and firm productivity. This finding is in line with heterogeneous firm theory, from which we argue, that these productivity effects are mainly benefiting high productive firms. Policies acting to decrease trade restrictions might help low productive domestic firms surpass the productivity verge, enter the import market and benefit from increasing import intensity