Irish Firms' Productivity and Imported Inputs

In this paper, we investigate the empirical relationship between firms' productivity in manufacturing and imports of intermediate inputs. Using a unique dataset for Ireland, we exploit the variability of import intensity within firm-year pairs to identify the impact of importing on firms' efficiency. Our findings show that an increase in the intensive margin of imports affects positively the efficiency of domestic Irish firms, in particular through the imports of materials. Most importantly, we find that responses to variations in import intensity depend on the initial level of productivity. The more efficient a domestic firm is, the larger the benefits from importing are. The results are robust to different estimation techniques and sample composition.