Total factor productivity growth at the firm-level: The effects of capital account liberalization

Xiang Li and Dan Su

Journal of International Economics, 2022, vol. 139, issue C

Abstract: This study provides firm-level evidence on the effect of capital account liberalization on total factor productivity (TFP) growth. We find that a one standard deviation increase in the capital account openness indicator constructed by Fernández et al. (2016) is significantly associated with a 0.18 standard deviation increase in firms’ TFP growth rates. The productivity-enhancing effects are stronger for sectors with higher external finance dependence and capital-skill complementarity, and are persistent five years after liberalization. Moreover, we show that potential transmission mechanisms include improved financing conditions, greater skilled labor utilization, and technology upgrades. Finally, we document heterogeneous effects across firm size and tradability, and threshold effects with respect to the country's institutional quality.

Keywords: Capital account liberalization; Economic growth; Total factor productivity (search for similar items in EconPapers)
JEL-codes: F02 F21 F36 F43 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:139:y:2022:i:c:s0022199622001088

DOI: 10.1016/j.jinteco.2022.103676

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