Trade, Productivity, and Services Input Intensity

Using rich administrative microdata on Ugandan firms, we investigate the response of productivity to trade participation for firms in all sectors of the economy, and the moderating role of services input intensity. We find that companies that participate in trade, especially through importing, display a productivity premium. Firms that export are more productive only for a sub-sample spanning the manufacturing sector. We do not find evidence that using service inputs more intensively enhances the relationship between trade participation and firm productivity. Rather, we find some evidence that a higher share of spending on services inputs attenuates the positive relationship between trade status and productivity. This suggests that the quality of available services may not be up to the standard required to be internationally competitive.