Trade Adjustment and Productivity in Large Crises

Abstract

We empirically characterize the mechanics of trade adjustment during the Argentine crisis using detailed transaction-level customs data covering the universe of import transactions during 1996-2008. Though imports collapsed by nearly 70 percent from 2000-2002, the entry and exit of firms or products at the country level (the "extensive margin") played a small role in this adjustment. By contrast, the within-firm churning of inputs (the "sub-extensive margin") played a sizeable role, and we highlight significant heterogeneity in how firms adjusted their import mix. Motivated by these facts, we build a model of trade in intermediate inputs with heterogeneous firms, fixed import costs, and roundabout production to evaluate the channels through which a collapse in imports affects productivity. Import demand is non-homothetic and therefore the implications for productivity depend on the details of individual firm adjustments and cannot be summarized by the change in the aggregate import share. We simulate the model to discuss quantitatively these mechanisms in the context of an imported input cost shock that produces a significant productivity decline. * We thank participants at various seminars for their comments and

Sovereign and private default risks over the business cycle

“…For all three countries, we observe deep recessions and substantial drops in imports around the default events. In line with our empirical findings, Gopinath and Neiman (2013) show for Argentina that the recession in the course of the default was accompanied by a substitution of imported intermediate goods by domestic intermediate goods. Moreover, sovereign defaults are associated with strong and persistent real depreciations in all three countries.…”

On the relationship between intermediate input imports and export quality in China

“…Similarly, the gains from accessing a greater variety of inputs have been widely addressed in the literature on input trade liberalization, for instance, Amiti and Konings (2007) and Yu (2015) link firm productivity increases to firm-level reductions in tariffs on intermediate inputs. Gopinath and Neiman (2014) confirm that the within-firm churning of imported inputs during the Argentine crisis from 2000 to 2002 played a sizeable role in the decline of productivity.…”

A Theory of Input-Output Architecture

“…Nevertheless, these wrinkles are easily accommodated, and while the exact expression used to identify ζ might vary with the application, the same general strategy should carry over. 60 Gopinath and Neiman (2014) and Lu, Mariscal, and Mejıa (2017) documented changes during crises, while Carvalho, Nirei, Saito, and Tahbaz-Salehi (2016) and Barrot and Sauvagnat (2016) studied disruptions following natural disasters. 61 Jones (2011Jones ( , 2013 argued that distortions may cause producers to use the wrong input quantities.…”