Imported Intermediate Inputs, Firm Productivity and Product Complexity

This paper takes product complexity into account to study the impact of imported intermediate inputs on firms. Highly disaggregated Chinese transaction-level trade data and firm-level production data from 2002 to 2006 are used to construct firm-level imported intermediate inputs. After controlling for the endogeneity of imported intermediate inputs and taking industrial imports of final goods into account, the analysis finds that firm productivity increases with increased imported intermediate inputs. The impact of imported intermediate inputs on firm productivity is weaker as firms produce more complex products.