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Trade and Market Selection: Evidence from Manufacturing Plants in Colombia

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Author Info

  • Marcela Eslava

    (Universidad de Los Andes)

  • John Haltiwanger

    (University of Maryland)

  • Adriana Kugler

    (Georgetown University)

  • Maurice Kugler

    (United Nations Development Programme)

Abstract

We examine the link between trade liberalization and aggregate productivity, with a focus on improved market selection resulting from a reduction in trade barriers and in the dispersion of these barriers across producers. Our analysis exploits tariff changes across sectors after the Colombian trade reform. An additional advantage of our analysis is that our TFP measure does not include demand and price effects. We find that reduced trade protection makes plant survival depend more closely on productivity. Using a dynamic simulation, we find that enhanced selection increases aggregate productivity substantially. Trade liberalization also increases productivity of incumbent plants and improves the allocation of activity. We find larger effects on allocative efficiency with our TFP measure than with a traditional measure including price effects. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/j.red.2012.10.009
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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 16 (2013)
Issue (Month): 1 (January)
Pages: 135-158

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Handle: RePEc:red:issued:11-69

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Related research

Keywords: Trade liberalization; Productivity; Market selection;

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References

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  1. Maurice Kugler, 2006. "Spillovers From Foreign Direct Investment:Within Or Between Industries?," BORRADORES DE ECONOMIA 003523, BANCO DE LA REPÚBLICA.
  2. Marcela Eslava & John Haltiwanger & Adriana Kugler & Maurice Kugler, 2006. "Plant Turnover and Structural Reforms in Colombia," IMF Staff Papers, Palgrave Macmillan, vol. 53(si), pages 3.
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  7. Eslava, Marcela & Haltiwanger Jr, John C & Kugler, Adriana D. & Kugler, Maurice, 2005. "Factor Adjustments after Deregulation: Panel Evidence from Colombian Plants," CEPR Discussion Papers 5267, C.E.P.R. Discussion Papers.
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Cited by:
  1. Diego Restuccia, 2013. "factor misallocation and development," The New Palgrave Dictionary of Economics, Palgrave Macmillan.
  2. Paul S. Segerstrom & Yoichi Sugita, 2013. "The Impact of Trade Liberalization on Industrial Productivity," CESifo Working Paper Series 4365, CESifo Group Munich.

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