Trade Liberalization and Firm Productivity: The Case of India

Petia Topalova

No 2004/028, IMF Working Papers from International Monetary Fund

Abstract: Using a panel of firm-level data, this paper examines the effects of India's trade reforms in the early 1990s on firm productivity in the manufacturing sector, focusing on the interaction between this policy shock and firm and environment characteristics. The rapid and comprehensive tariff reductions-part of an IMF-supported adjustment program with India in 1991-allow us to establish a causal link between variations in inter-industry and intertemporal tariffs and consistently estimated firm productivity. Specifically, reductions in trade protectionism lead to higher levels and growth of firm productivity, with this effect strongest for private companies. Interestingly, state-level characteristics, such as labor regulations, investment climate, and financial development, do not appear to influence the effect of trade liberalization on firm productivity.

Keywords: WP; firm; industry; productivity measure; industry level; panel data; trade protection; Trade policy; firm productivity; Indian manufacturing; endogeneity of protection; public sector firm; productivity shock; raw material input; firms in state; choice of variable inputs; measure of TFP; Trade liberalization; Productivity; Total factor productivity; Tariffs; Middle East; Asia and Pacific (search for similar items in EconPapers)
Pages: 38
Date: 2004-02-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (105)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=17176 (application/pdf)

Related works:
Journal Article: Trade Liberalization and Firm Productivity: The Case of India (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2004/028

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi (amodi@imf.org).