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Trade liberalization and industry performance in Bangladesh

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  • Hassan, M. Kabir
  • Isik, Ihsan
  • Mamun, Abdullah

Abstract

This paper analyzes trade liberalization's impact on Bangladesh's manufacturing sector performance. Using firm level input and output data and employing a nonparametric data envelopment analysis (DEA), we calculate technical, pure technical and allocative efficiencies for a sample of 82 firms collected over two periods of time: 1993 and 1998. Then, applying a Malmquist index method, we calculate indices of total factor productivity change and decompose them into technological change, technical efficiency change and scale efficiency change. Our results show that the majority of Bangladeshi manufacturing firms experienced a positive total factor productivity growth between 1993 and 1998, averaging 29% over a five-year period. Export-oriented firms have performed better than import-oriented firms in improving their technical efficiency relative to the best-practice firms in their own sub-group. When these results are compared with the official statistics on the output performance of manufacturing firms, we can conclude that trade liberalization in the 1990s did not adversely affect the Bangladeshi manufacturing industry.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Policy Modeling.

Volume (Year): 32 (2010)
Issue (Month): 3 (May)
Pages: 399-417

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Handle: RePEc:eee:jpolmo:v:32:y::i:3:p:399-417

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Web page: http://www.elsevier.com/locate/inca/505735

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Keywords: Trade liberalization Efficiency Productivity DEA Malmquist index Bangladesh;

References

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  1. Dani Rodrik, 1992. "The Limits of Trade Policy Reform in Developing Countries," Journal of Economic Perspectives, American Economic Association, vol. 6(1), pages 87-105, Winter.
  2. James Levinsohn & Amil Petrin, 2000. "Estimating Production Functions Using Inputs to Control for Unobservables," NBER Working Papers 7819, National Bureau of Economic Research, Inc.
  3. Rahman, Mustafizur, 1997. "Recent policy of trade liberalization in Bangladesh and issues of regional cooperation in South Asia," Journal of Asian Economics, Elsevier, vol. 8(1), pages 117-141.
  4. Tybout, James R. & Westbrook, M. Daniel, 1995. "Trade liberalization and the dimensions of efficiency change in Mexican manufacturing industries," Journal of International Economics, Elsevier, vol. 39(1-2), pages 53-78, August.
  5. Isik, Ihsan & Kabir Hassan, M., 2003. "Financial deregulation and total factor productivity change: An empirical study of Turkish commercial banks," Journal of Banking & Finance, Elsevier, vol. 27(8), pages 1455-1485, August.
  6. Roberts, Mark J. & Tybout, James R., 1991. "Size rationalization and trade exposure in developing countries," Policy Research Working Paper Series 594, The World Bank.
  7. Tybout, James R, 1992. "Linking Trade and Productivity: New Research Directions," World Bank Economic Review, World Bank Group, vol. 6(2), pages 189-211, May.
  8. Isik, Ihsan & Hassan, M. Kabir, 2002. "Technical, scale and allocative efficiencies of Turkish banking industry," Journal of Banking & Finance, Elsevier, vol. 26(4), pages 719-766, April.
  9. Tybout, James & de Melo, Jamie & Corbo, Vittorio, 1991. "The effects of trade reforms on scale and technical efficiency : New evidence from Chile," Journal of International Economics, Elsevier, vol. 31(3-4), pages 231-250, November.
  10. Yang, Ji-Chung, 2006. "The efficiency of SMEs in the global market: Measuring the Korean performance," Journal of Policy Modeling, Elsevier, vol. 28(8), pages 861-876, November.
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Cited by:
  1. Hudson, John & Orviska, Marta, 2013. "Firms’ adoption of international standards: One size fits all?," Journal of Policy Modeling, Elsevier, vol. 35(2), pages 289-306.

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