Imports, Productivity and the Origin Markets -the role of knowledge-intensive economies

This paper investigates whether domestic firms’ productivity is an increasing function of imports from the most knowledge intensive economies in the world, i.e. the G7 countries. Using Swedish firm-level data, we confirm an instantaneous causality going from imports to productivity. We also show that productivity is increasing in the G7-fraction of total imports. Our results highlight the importance of import flows from R&D and knowledge intensive economies for productivity and are consistent with imports being a vehicle for technology diffusion. Tests of the sensitivity of the results suggest that G7 imports are particularly important for firms in high-technology sectors and for firms belonging to multinationals and domestic corporations.