Imported Inputs, Government Support and Performance of Manufacturing Exporters

10 April 2018
Publication Type: Working Paper
JEL Code: F1, F11, F13, F14, O21, O24

We evaluate the effectiveness of trade policy incentive that promotes the use of imported intermediate inputs. Specifically, we examine the performance differences in firm export outcomes for the beneficiaries relative to the non-beneficiaries to Kenya’s duty exemption scheme on imported inputs. Using fixed effects to address potential endogeneity, we find a positive and significant performance premium for the importer-exporters who import intermediate inputs through the scheme. This subset of firms outperforms non-beneficiaries in export value and geographic scope of exports, but there is no significant difference in the number of products exported. This result suggests that reducing the costs of inputs can help firms overcome market access costs and potentially expand the destination scope of exports that are in turn, positively associated with greater performance in a country’s aggregate exports.

Working paper 740
1 April 2018