When imports matter for exports: Firm level evidence from Pakistan

Policy brief 8 May 2019 Firms

Authors

This study by Dr. Salamat Ali, Dr Mohammad A. Razzaque, and Shafqat Ali Khan investigated the linkages between liberalisation of imports and diversification of exports by using detailed firm-level data on imports, exports, and production for Pakistan.
The study used an administrative dataset of exports, imports, and domestic sales for the period 2000-2016. The import and export data contained 27.8 million and 16.2 million transactions respectively.
The study finds strong evidence of cointegration between imports and exports, suggesting a long-run relationship between these two series. The relationship holds at the macro, sectoral, and firm levels.
The findings also suggest that additional levies apart from just customs duty can have major trade-impeding effects. Therefore, policymakers aiming to promote exports of domestic firms need to realise that the entire set of border taxes that contribute towards input and output costs are key constraints on export growth.