How easily firms substitute between domestic and foreign suppliers within an input is central to several questions in international economics, but credible empirical estimates remain limited. Aggregate estimates of this elasticity confound production and consumption margins and ignore firm heterogeneity. I provide one of the first plant-level estimates of the elasticity of substitution between domestic and foreign suppliers within narrowly defined inputs. Using rich Indian plant-level data, I estimate an elasticity of 0.50, implying complementarity between foreign and domestic sourcing and substantially below recent estimates based on aggregate data. Aggregating the same data across plants to mimic national input-sourcing data yields estimates that are three to four times higher. I derive conditions under which ignoring firm heterogeneity generates positive aggregation bias in elasticity estimates, and show that these conditions hold empirically in my setting. I then embed this complementarity in a general equilibrium model with input-output linkages. A quantitative application to the dollar shock induced by the 2013 Taper Tantrum shows that, relative to a substitutes benchmark, complementarity amplifies the negative GDP effect by 13%. This amplification is strongest for firms that source from foreign and domestic suppliers in similar proportions, and suppressing heterogeneity in firm-level import shares substantially increases aggregate GDP losses under complementarity. Finally, whether complementarity amplifies or attenuates the effects of upstream shocks depends on the origin of the underlying micro shock.

We study how access to international markets shapes the local effects of external liberalization. Exploiting India’s 1990s liberalization that lowered prices in both manufacturing and agriculture, and the digitized road network, we show that input tariff declines spurred large increases in manufacturing output, firm entry, and employment, with substantially stronger effects in districts better connected to international markets. Output tariff reductions had no measurable impact. Better international access induced a sharper structural transformation within tradable sectors, with labor reallocating from agriculture to manufacturing and producer services, and increased migration from less to more internationally connected districts. We develop a quantitative spatial to understand the role of international access in the distribution of income from trade liberalization. Better international access by the median increases welfare by 9.8%. Investing in a road network targeting port connectivity significantly dampens spatial inequalities.

Recent shifts in global trade patterns have received a lot of attention, but the implications of these shifts for domestic value added in exports (DVAR) have so far been overlooked. This paper documents substantial increases in Viet Nam’s aggregate DVAR since 2018, reversing a long declining trend. Analysis using matched firm-level and customs data reveals that idiosyncratic US demand shocks had large positive effects on firm-level DVAR and output. Firms respond to the shocks by exporting more to both US and non-US markets, and their labor productivity increases, both that are consistent with the economies of scale. Firms also increase their use of domestic materials and reduce reliance on imported materials, suggesting sensitivity to implicit rules of origin. Finally, the paper highlights the role of firm ownership, with non-Chinese owned firms driving the increase in domestic value added.

Structural transformation depends not only on sectoral productivity growth, but also on how transportation and communication infrastructure integrates sectors and markets in the economy. Using newly digitized spatial data, we study the role of India's expansion of roads and GSM networks during a decade of rapid economic growth and a movement of workers from agriculture into services. Interpreted through the lens of a multi-sector spatial model with non-homothetic demand, we find that infrastructure and sectoral productivity growth both account equally in explaining India's economic growth during this period. Within infrastructure, the contribution is concentrated in communication relative to transportation; and communication further operates through both output-market integration and input access. Lastly, the gains are larger in initially less urbanized districts, highlighting how infrastructure shapes both the sectoral and spatial incidence of growth.