We consider two channels via which foreign inputs into industrial production may lead to productivity effects. The first one concerns dynamic externalities between firms which share technical and organizational knowledge which is vital for the productivity growth of a particular industry. We...

We show that the combination of monopolistic competition and input-output linkages generate what we call an input distortion. The distortion arises because material input prices involve a markup over the social opportunity cost. This has so far escaped attention in the literature addressing...