From firm-level imports to aggregate productivity: Evidence from Korean manufacturing firm data

Abstract

Using Korean manufacturing firm-level data, this paper confirms that the use of imported inputs leads to increased productivity and that larger firms are more likely to use imported inputs. We find as a result that firm-level import decisions explain a non-trivial fraction of the fluctuations in manufacturing aggregate productivity in Korea over the period between 2006 and 2012. Specifically, our estimation results show that Korean manufacturing aggregate TFP declined by 8.7% during the Global Financial Crisis, about one-third of which is attributable to a contraction in firm-level import intensity. The main findings of this paper suggest a possible link between the recent global slowdown in productivity and the slowdown in global trade.