International sourcing during COVID-19: How did Chilean firms fare?

Abstract

COVID-19 has proven to be a unique and complex shock for firms. In this paper we analyze the performance of individual Chilean firms during this episode drawing on administrative datasets. In particular we empirically characterize the international trade adjustment at the firm and product level. Importer firms, specially in the manufacturing sector, have adjusted their import flow through three margins along 2020/21. In 2020 imports declined as some firms either stopped their import activity, or they imported less product varieties (product and country of origin) or by reducing the intensity of imported varieties. In this period importers faced a short-lived increase in imported input costs. In 2021 imports rebound strongly. While exporter firms (excluding mining) kept their export activity as well as their selling price stable. We also explore if foreign factors such as the incidence of COVID-19 and containment measures in partner countries had an impact on Chilean trade during 2020. We find that these foreign factors had an impact on intermediate rather than consumption goods imports.