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

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  • Berhanu Abegaz
  • Arnab K. Basu

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.

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Bibliographic Info

Article provided by M.E. Sharpe, Inc. in its journal Emerging Markets Finance and Trade.

Volume (Year): 47 (2011)
Issue (Month): 1 (January)
Pages: 5-27

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Handle: RePEc:mes:emfitr:v:47:y:2011:i:1:p:5-27

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Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=111024

Related research

Keywords: liberalization; manufacturing; markup; scale economies; total factor productivity (TFP);

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References

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Cited by:
  1. Aleksandra Parteka & Joanna Wolszczak-Derlacz, 2013. "The Impact of Trade Integration with the European Union on Productivity in a Posttransition Economy: The Case of Polish Manufacturing Sectors," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 49(2), pages 84-104, March.
  2. Kravtsova, Victoria & Radosevic, Slavo, 2012. "Are systems of innovation in Eastern Europe efficient?," Economic Systems, Elsevier, vol. 36(1), pages 109-126.

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