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Abstract

Brazil's trade liberalization between 1990 and 1993, and its partial re- versal in 1995, are used to study how reduced inward trade barriers affect productivity. The production function of Brazilian manufactur- ers is estimated at the ISIC3 two-digit level under various alternatives, including an extension of Olley and Pakes' (1996) procedure. Firm-level productivity is inferred and then related to trade. Findings suggest that (1) foreign competition pressures firms to raise productivity markedly, whereas (2) the use of foreign inputs plays a minor role for produc- tivity change. (3) The shutdown probability of inefficient firms rises with competition from abroad, thus contributing positively to aggre- gate productivity. Counterfactual simulations indicate that the compet- itive push (1) is an important source of immediate productivity change, while the elimination of inefficient firms (3) unfolds its impact slowly.

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Bibliographic Info

Paper provided by Department of Economics, UC San Diego in its series University of California at San Diego, Economics Working Paper Series with number qt6m96c2r7.

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Date of creation: 01 Feb 2004
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Handle: RePEc:cdl:ucsdec:qt6m96c2r7

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Related research

Keywords: Productivity;

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Find related papers by JEL classification:

• F14 - International Economics - - Trade - - - Empirical Studies of Trade
• F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

References

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