The Department of Economics Theory, History and Development Seminar Series presents

"Imported Inputs, Quality Complementarity, and Skill"
with Nico Voigtlander, Assistant Professor of Economics, UCLA Anderson School of Management

Monday, May 20, 2013
3:30-5:00 p.m.
Social Science Plaza B, Room 3218

This talk analyzes how access to imported inputs affects firms in developing countries, where domestically produced high-quality inputs are relatively costly. Voigtlander's O-Ring type model with quality complementarity across input tasks ranks tasks by their quality-sensitivity. Because high-quality inputs are relatively cheap in international markets, firms use these instead of domestic inputs for quality-sensitive production steps. This substitution effect lowers the demand for domestic input quality (such as skilled labor), while it raises output quality. At the same time, the complementarity effect increases the return to quality in the remaining domestic tasks. This raises output quality further; it also increases the demand for domestic input quality (skills), counterbalancing the first effect. To provide evidence for this mechanism, Voigtlander matches high-resolution data from Chilean customs to a large firm-level panel for the period 1992-2005. In line with the model’s predictions, importers use ceteris paribus a lower share of skilled workers, while their skill demand increases significantly with the quality of imports.

For further information, please contact Gloria Simpson, or 949-824-5788.

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