DP12237 Firm Size and the Intensive Margin of Import Demand

Author(s): Joaquin Blaum, Claire Lelarge, Michael Peters
Publication Date: August 2017
Keyword(s): Firm Heterogeneity, firm size, non-homothetic, trade in intermediate inputs
JEL(s): D21, D22, D24, F11, F12, F14
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=12237

We use French microdata to test an ubiquitous property of firm-based models of importing. When firm efficiency is factor neutral and input prices and qualities are common across firms, firm size should have no effect on expenditure shares on the different products and varieties sourced, holding the extensive margin constant. We show that this property is not supported by the data. Holding the sourcing strategy fixed, we find that larger firms (i) have lower import shares, (ii) concentrate their import spending on their top varieties and (iii) pay higher prices for their imported inputs. Our findings imply that input trade, through the intensive margin, is less beneficial for larger firms. Our results are consistent with a complementarity between firm productivity and input quality.