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Trade Liberalization, Intermediate Inputs and Productivity: Evidence from Indonesia

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Author Info
Amiti, Mary
Konings, Jozef

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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.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5104.

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Date of creation: Jun 2005
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Handle: RePEc:cpr:ceprdp:5104

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Keywords: inputs productivity tariffs

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Find related papers by JEL classification:
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 - - - Country and Industry Studies of Trade

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  2. James R. Tybout, 2000. "Manufacturing Firms in Developing Countries: How Well Do They Do, and Why?," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 11-44, March. [Downloadable!] (restricted)
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    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Long, Ngo Van & Raff, Horst & Stähler, Frank, 2007. "The Effects of Trade Liberalization on Productivity and Welfare: The Role of Firm Heterogeneity, R&D and Market Structure," Economics working papers 2007,20, Christian-Albrechts-University of Kiel, Department of Economics. [Downloadable!]
  2. Mary Amiti & John Romalis, 2007. "Will the Doha Round Lead to Preference Erosion?," NBER Working Papers 12971, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Filip Abraham & Jozef Konings & Stijn Vanormelingen, 2006. "Price and wage setting in an integrating Europe : firm level evidence," Research series 200610-5, National Bank of Belgium. [Downloadable!]
  4. Jozef Konings & Hylke Vandenbussche, 2007. "Antidumping Protection and Productivity of Domestic Firms: A firm level analysis," LICOS Discussion Papers 19607, LICOS - Centre for Institutions and Economic Performance, K.U.Leuven. [Downloadable!]
    Other versions:
  5. Hiroyuki Kasahara & Beverly Lapham, 2008. "Productivity and the Decision to Import and Export: Theory and Evidence," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  6. Facundo Albornoz & Paolo Vanin, 2007. "Trade Policy and Industrial Structure," Discussion Papers 05-12R, Department of Economics, University of Birmingham. [Downloadable!]
  7. Marian Rizov & Patrick Paul Walsh, 2005. "Linking Productivity to Trade in the Structural Estimation of Production within UK Manufacturing Industries," The Institute for International Integration Studies Discussion Paper Series iiisdp98, IIIS. [Downloadable!]
  8. Natalia Trofimenko, 2005. "Learning by Exporting: Does It Matter Where One Learns?," Kiel Working Papers 1262, Kiel Institute for the World Economy. [Downloadable!]
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