Imported Inputs and Egyptian Exports: Exploring the Links

Abstract

This paper is the first to explore the links between exporting and importing activities of Egyptian firms using panel data over the period from 2003 to 2007. The main aim is twofold. Firstly, the authors report regression results indicating that firms that both export and import are the most productive, followed by importing-, exporting-only firms and non-traders. Secondly, they estimate the determinants of the extensive and intensive margins of exports and imports using dynamic panel-Probit and panel-Tobit models in combination with the method proposed by Rabe-Hesketh and Skrondal (Avoiding biased versions of Wooldridge's simple solution to the initial conditions problem, 2013) to tackle the initial conditions problem. The results show that both activities present a high degree of hysteresis, which is higher for imports than for exports pointing to the existence of sunk costs in both activities. Moreover, past productivity does affect the extensive margin of imports, but not of exports and the initial condition status is also only relevant for the import side. Similar outcomes are obtained for the intensive margin of trade. JEL F14Keywords Firm level data; Egypt; internationalization; imports; exports; intermediates Authors María Dolores Parra, Research Group of Industry and Territory, Department of Economics -CREIP, Universitat Rovira i Virgili, 43204 Reus, Catalonia, Spain, and Institute of International Economics, Universitat Jaume I, Castellón, 12071, Spain, mparra@eco.uji.es Inmaculada Martínez-Zarzoso, Department of Economics, University of Göttingen, 37001 Göttingen, Germany, and Institute of International Economics, Universitat Jaume I, Castellón, 12071, Spain Citation María Dolores Parra and Inmaculada Martínez-Zarzoso (2015). Imported Inputs and Egyptian Exports: Exploring the Links. Economics: The Open-Access, Open-Assessment E-Journal, 9 (2015-38): 1-31. http:// dx.doi.org/10.5018/economics-ejournal.ja. www.economics-ejournal.org 2 IntroductionIn recent years, there has been a growing interest in the study of the internationalization strategies of small-and medium-size firms in developing countries. According to the related trade literature, a high proportion of trading firms are engaged in both importing and exporting activities. Kasahara and Lapham (2013) show that this is due to the presence of cost complementarities in both activities. Once one of the activities is carried out, the second becomes easier. These cost complementarities have motivated a new strand of research that further investigates the relationship between import and export activities at the firm level, especially those focused on the use of imported intermediates and their role in enhancing exports (Muûls and Pisu 2009;Bas 2012;Aristei et al. 2013;Kasahara and Lapham 2013;Lo Turco and Maggioni 2013). While most of the existent literature on the relationship between productivity and import and export activities has focused on developed countries, the literature concerning developing countries is still scarce. In particu...

The Imported Inputs and Firm Export Performance in Indonesian Textile and Apparel Industries

“…The size of the firm is proxied with the number of employees in the firm, which follows The Indonesian Central Bureau of Statistics classifications. The correlation between size and export performances is expected to be positive (Edwards et al, 2018;Fan et al, 2015;Parra & Martínez-Zarzoso, 2015;Silva & Forte, 2018;Tomiura, 2007). Capital intensity is proxied as the firm's decomposed capital assets in machinery per labor.…”

Imported inputs and exporting in the Africa’s manufacturing sector

“…Additionally, imported inputs ensure the production of high-quality varieties at a lower cost which boosts a firm's profits and makes the firm ready for the international market both in terms of the required quality and variety of the products. This has been documented and supported in the literature as the direct channel through which the importation of inputs enhances the probability of exporting (Bas and Strauss-Kahn, 2014;Feng et al, 2016;Edward et al, 2017;Grazzi et al, 2017;Castellani and Fassio, 2016;Kasahara and Lapham, 2013;Parra and Martínez-Zarzoso, 2015). Edwards et al (2017) and Feng et al (2016) emphasized the fact that it is imported inputs sourced from advanced economies that spur exporting activities and not imported inputs, in general.…”

“…Besides the preceding empirical discussion about the direct and indirect effects of imported inputs on firm export performance, there is equally a plethora of empirical literature examining the relationship between imported inputs and export performance of firms without explicitly stating the directness or indirectness of relationship (Edward et al, 2017;Bas and Strauss-Kahn, 2014;Feng et al, 2016;Castellani and Fassio, 2016;Pierola et al, 2015;Parra and Martínez-Zarzoso, 2015;Jienwatcharamongkhol, 2015;Grazzi et al, 2017;Turco and Maggioni, 2013;Muuls and Pisu, 2009;Kasahara and Lapham, 2013). For example, using manufacturing firm-level data from China, Feng et al (2016) showed that an increase in the importation of firm inputs is associated with an increase in exports and export product varieties with effects varying with the source of imports.…”

“…From the literature survey done, it is clear that while there is much of the literature connecting imported inputs and exporting concentrates on developed countries, there is still a huge knowledge gap for developing countries, especially those in SSA. The only papers focusing on Africa are by Parra and Martínez-Zarzoso (2015), who focused on the Egyptian manufacturing sector, and Edwards et al (2017), who used firm-level data from South Africa. We extend this literature by undertaking firm-level analysis in a cross-country setting among manufacturing firms in Africa.…”