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Trade Liberalization and Firm Productivity: The Case of India

Petia Topalova and Amit Khandelwal

The Review of Economics and Statistics, 2011, vol. 93, issue 3, 995-1009

Abstract: This paper exploits India's rapid, comprehensive, and externally imposed trade reform to establish a causal link between changes in tariffs and firm productivity. Pro-competitive forces, resulting from lower tariffs on final goods, as well as access to better inputs, due to lower input tariffs, both appear to have increased firm-level productivity, with input tariffs having a larger impact. The effect was strongest in import-competing industries and industries not subject to excessive domestic regulation. While we find no evidence of a differential impact according to state-level characteristics, we observe complementarities between trade liberalization and additional industrial policy reforms. © 2011 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Date: 2011
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Working Paper: Trade Liberalization and Firm Productivity; The Case of India (2004) Downloads
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The Review of Economics and Statistics is currently edited by Amitabh Chandra, Olivier Coibion, Bryan S. Graham, Shachar Kariv, Amit K. Khandelwal, Asim Ijaz Khwaja, Brigitte C. Madrian and Rohini Pande

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