Are All Imports Created Equal? The Link between Imported Intermediate Sources and Export Success for Chinese Firms

This paper investigates the role of intermediate input sources in explaining firm-level export patterns. I present a multi-country trade model which features a trade cost-reducing complementarity between exporting to and importing from a given market. Therefore, the total cost faced by a firm which does both activities in the same destination is lower than the sum of the destination-specific import and export costs. Exploiting China's full membership to the WTO in late 2001, I test the veracity of the model using data on Chinese manufacturing firms from 2002-2006. I provide evidence that firms which import a greater portion of inputs from a particular country earn a greater portion of export revenue shares from said country. This effect is stronger for smaller (less productive) firms than for larger (more productive) ones, for private and foreign firms than for state-owned enterprises, and for products with greater scope for differentiation