Trade Liberalization, Intermediate Inputs and Productivity: Evidence from Indonesia
Abstract
This paper estimates the effects of trade liberalization on plant productivity. In contrast to previous studies, we distinguish between productivity gains arising from lower tariffs on final goods relative to those on intermediate inputs. Lower output tariffs can produce productivity gains by inducing tougher import competition whereas cheaper imported inputs can raise productivity via learning, variety or quality effects. We use Indonesian manufacturing census data from 1991 to 2001, which includes plant level information on imported inputs. The results show that the largest gains arise from reducing input tariffs. A 10 percentage point fall in output tariffs increases productivity by about 1%, whereas an equivalent fall in input tariffs leads to a 3% productivity gain for all firms and an 11% productivity gain for importing firms.Download Info
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5104.Length:
Date of creation: Jun 2005
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Handle: RePEc:cpr:ceprdp:5104
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Related research
Keywords: inputs; productivity; tariffs;Other versions of this item:
- Mary Amiti & Jozef Konings, 2007. "Trade Liberalization, Intermediate Inputs, and Productivity: Evidence from Indonesia," American Economic Review, American Economic Association, vol. 97(5), pages 1611-1638, December.
- Mary Amiti & Jozef Konings, 2005. "Trade Liberalization, Intermediate Inputs, and Productivity: Evidence from Indonesia," IMF Working Papers 05/146, International Monetary Fund.
- Amiti, M. & Konings, Joep, 2007. "Trade liberalization, intermediate inputs, and productivity: evidence from Indonesia," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/197555, Katholieke Universiteit Leuven.
- F10 - International Economics - - Trade - - - General
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-08-13 (All new papers)
- NEP-EFF-2005-08-13 (Efficiency & Productivity)
- NEP-INT-2005-08-13 (International Trade)
- NEP-SEA-2005-08-13 (South East Asia)
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