Are importing and exporting complements or substitutes in an emerging economy? The case of Colombia

Abstract

AbstractThe aim of this paper is to investigate the impact of two trading strategies (exporting and importing) on total factor productivity (TFP) and the potential complementarity/substitutability effects of these strategies. In order to assess these effects, robust estimates of TFP are obtained using a general method of moments approach that explicitly determines the ability of a firm's trading experience to affect productivity. Data from the Annual Manufacturing Survey spanning from 2007 to 2016 is used for Colombian manufacturing firms. Our estimation results suggest that, regardless of the technological intensity of the industry in which the firm operates, active trading strategies (exporting only, importing only, both importing and exporting) pay positive rewards in terms of productivity. Nevertheless, whilst positive (complementary) synergies are found between exporting and importing for firms in med/high‐tech sectors, for firms operating in low‐tech and med/low‐tech sectors, importing and exporting appear to be substitutes.