Using a novel dataset we examine the pricing behavior of Indian exporters, in particular looking at the relationship between export prices and the quality of imported inputs that firms use, conditioning on firm capability (productivity). Exporting firms that directly import are different in important ways from exporters that do not import directly. Among directly importing exporters, higher quality (higher price) imports are associated with higher quality (higher price) exports. In this respect, Indian exporters behave similarly to other developing country exporters, offering suggestive evidence of the importance for export success of access to high-quality imports.

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Acknowledgments

We are deeply grateful for able research assistance from Matthew Reardon. We also thank Stephanie Fortune-Taylor, Hannah Hall, George Nurisso, Daniel Rodriguez, and Rainy Zhang. We gratefully acknowledge helpful comments, especially from Chris Handy, and also from participants in sessions at the fall 2016 Mid-West International Economics Group meetings, at the fall 2016 Southern Economics Association meetings, and at the U.S. International Trade Commission, Office of Economics, Research Division seminar series, where versions of this paper were presented. An earlier version of this paper appeared as USITC Office of Economics Working Paper 2017-01-B, January 2017, and Anderson and Smith gratefully acknowledge the support of the USITC's Office of Economics Research Division, where they served as Visiting Scholars in fall 2016. This paper represents the views of its authors only and is not meant to represent in any way the views of the U.S. International Trade Commission or any of its individual Commissioners.

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Firm Heterogeneity, Imported Input Quality, and Export Pricing in India

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