Trade and productivity in formal and informal firms: panel data evidence from Cambodia

Kiyoyasu Tanaka

No 771, IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO)

Abstract: The impact of trade on productivity is a crucial policy question for development, but prior work predominantly focuses on the formal sector. This paper constructs new panel data on formally registered and unregistered establishments in Cambodia. For identification, I exploit a natural experiment from Cambodia; the EU’s reform in rules of origin for the EU Generalized System of Preferences provided a positive export shock to the garment industry and a negative import shock to the textile industry. I find significant productivity improvements for both formal and informal establishments in the garment industry during the post-reform period. Positive export shocks promote productivity for both formal and informal firms.

Keywords: Trade; productivity; formal; informal; Cambodia; International trade (search for similar items in EconPapers)
JEL-codes: D24 E26 F13 F14 L67 (search for similar items in EconPapers)
Date: 2020-03
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Published in IDE Discussion Paper = IDE Discussion Paper, No. 771. 2020-03

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