Imported Intermediate Goods and Economic Growth Nexus: A Cross-National Analysis

Abstract

Purpose - This research aims to analyze the effect of productivity gains from imported intermediate goods on economic growth in a cross-national analysis. Design/methodology/approach - An index measuring productivity gains at the country level is constructed using disaggregated trade data from the United Nations Commodity Trade Statistics Database (COMTRADE). In particular, this paper focuses on the results for the sub-samples of developed and developing countries (more precisely, OECD member countries and non-member countries). We could a priori expect that gains from imported inputs would be larger in developing countries because developing countries are expected to experience higher productivity growth due to the introduction of new and better intermediate goods. Findings - The main result shows that the proposed index is a useful predictor of Long-run economic growth in developing countries. Research implications or Originality - This study implies that developing countries can attain higher economic growth simply by increasing the use of high-quality imported intermediate inputs. On the contrary, higher utilization of foreign inputs cannot guarantee economic growth in developed countries. One possible explanation is that firms in developed countries are likely to belong to a technology-leader group. Self-innovation may play a more important role to enhance the competitiveness of these firms.