The Effect of Trade Protection on Productivity in Uruguay

Carlos Casacuberta () and Dayna Zaclicever
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Carlos Casacuberta: Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República
Dayna Zaclicever: Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República

No 215, Documentos de Trabajo (working papers) from Department of Economics - dECON

Abstract: We analyze the effect of trade protection on firm’s performance using a panel of firms from the Annual Manufacturing Surveys of Uruguay from 1988 to 2005. We estimate total factor productivity using Levinsohn and Petrin (2003) methodology and relate such measures to protection. Firm-specific protection is measured as the average tariff within the four-digit harmonized system classes containing the firm’s products (rather than the usual four-digit ISIC averages), tracking more closely the relevant markets, both for firm’s product and input baskets, and separate indices are calculated. We find a positive effect of reduction in output protection on total factor productivity, while the effect of lower input protection, when significant, is negative, which we find related to the overall change in effective protection. Reductions in bilateral tariffs with Uruguay’s large neighbors in the context of MERCOSUR are not found to have a significant productivity enhancing effect. The results are robust to alternative protection measures, specification and controls.

Keywords: Total factor productivity; Trade protection. (search for similar items in EconPapers)
JEL-codes: D24 F14 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2015-04
New Economics Papers: this item is included in nep-bec, nep-eff, nep-int and nep-lam
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