The Elusive Productivity Effect of Trade Liberalization in the Manufacturing Industries of Emerging Economies

Berhanu Abegaz and Arnab Basu

Emerging Markets Finance and Trade, 2011, vol. 47, issue 1, 5-27

Abstract: Using a model that admits variable returns and imperfect competition, we investigate the impact on total factor productivity of trade liberalization in six emerging economies. Regressions based on panel data for twenty-eight three-digit manufacturing industries show that productivity growth is insensitive to tariff reduction. These results are at variance with country-specific studies that, using firm-level data, generally find a positive association between liberalization and productivity growth. While aggregation effects may matter, our results can also be explained as follows: significant productivity gains by latecomers via technological assimilation do take time and require appropriate sequencing of reforms of trade and industrial policies.

Keywords: liberalization; manufacturing; markup; scale economies; total factor productivity (TFP) (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (3)

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Working Paper: The Elusive Productivity Effect of Trade Liberalization in the Manufacturing Industries of Emerging Economies (2010)
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