Importing after Exporting

In this paper, we uncover a novel fact about the relationship between exporting and importing. Using a comprehensive database of Argentine firms, we find that exporting to a new destination increases the probability of a firm... [ view full abstract ]

In this paper, we uncover a novel fact about the relationship between exporting and importing. Using a comprehensive database of Argentine firms, we find that exporting to a new destination increases the probability of a firm beginning to import from that market within the lapse of one year. In a standard model of importing, we derive predictions on the effect of productivity and import costs on the intensive and extensive margins of importing. Comparing these predictions with the observed effect of reaching new export destinations, we argue that export entry in new markets reduces import fixed costs. We show that importing after exporting is stronger in distant markets and in situations where importing involves non-homogeneous and rarely imported goods. Taken together, our results suggest that firms gain knowledge on -or establish links with- potential suppliers after export entry, which reduces the costs associated with searching for import sources.