Imported inputs, technology spillovers and productivity: firm-level evidence from Uruguay

For small developing countries international trade can be a major channel for productivity growth. In particular, imports may enhance domestic firms’ productivity by giving them access to a larger variety of and/or better inputs (in terms of quality and incorporated technology). This paper analyses these import-induced productivity effects in the case of Uruguayan manufacturing firms, disentangling the impact of increased access to intermediate input varieties from that of technology transfer. The results obtained for the period 1999–2008 show a positive effect of foreign inputs on firms’ productivity, which would have operated through different channels according to the geographical origin of inputs.