TY - JOUR AU - Goldberg,Pinelopi K. AU - Khandelwal,Amit AU - Pavcnik,Nina AU - Topalova,Petia TI - Imported Intermediate Inputs and Domestic Product Growth: Evidence from India JF - National Bureau of Economic Research Working Paper Series VL - No. 14416 PY - 2008 Y2 - October 2008 UR - http://www.nber.org/papers/w14416 L1 - http://www.nber.org/papers/w14416.pdf N1 - Author contact info: Pinelopi K. Goldberg Yale University Department of Economics 37 Hillhouse Ave. P.O. Box 208264 New Haven, CT 06520-8264 E-Mail: penny.goldberg@yale.edu Amit Khandelwal Graduate School of Business Columbia University Uris Hall 606, 3022 Broadway New York, NY 10027 Tel: 212/854-7506 Fax: 212/316-9219 E-Mail: ak2796@columbia.edu Nina Pavcnik Department of Economics 6106 Rockefeller Center Dartmouth College Hanover, NH 03755 Tel: 603/646-2537 Fax: 603/646-2122 E-Mail: nina.pavcnik@dartmouth.edu Petia Topalova Asia and Pacific Department International Monetary Fund (IMF) 700 19th Street, N.W. Washington DC 20431 E-Mail: PTopalova@imf.org AB - New goods play a central role in many trade and growth models. We use detailed trade and firm-level data from a large developing economy—India—to investigate the relationship between declines in trade costs, the imports of intermediate inputs and domestic firm product scope. We estimate substantial static gains from trade through access to new imported inputs. Accounting for new imported varieties lowers the import price index for intermediate goods on average by an additional 4.7 percent per year relative to conventional gains through lower prices of existing imports. Moreover, we find that lower input tariffs account on average for 31 percent of the new products introduced by domestic firms, which implies potentially large dynamic gains from trade. This expansion in firms' product scope is driven to a large extent by international trade increasing access of firms to new input varieties rather than by simply making existing imported inputs cheaper. Hence, our findings suggest that an important consequence of the input tariff liberalization was to relax technological constraints through firms’ access to new imported inputs that were unavailable prior to the liberalization. ER -