In recent years there has been a revival of interest in the trade-growth nexus. A number of authors have suggested that regional economic integration and liberalization of international trade are likely to have positive effects not only on productivity levels but also on long-term productivity growth rates in developing countries. Using a panel of Mexican manufacturing industries, this paper examines several alternative mechanisms through which trade contributes positively to productivity levels and growth rates. Special attention is paid to the comprehensive trade liberalization policies implemented in Mexico after 1986. The results indicate that productivity growth is significantly correlated with the share of imported intermediate inputs in sectoral output. Reductions in rates of protection are found to have significant positive effects on sectoral productivity levels. The estimates also suggest that after liberalization increasing share of exports in total output increased average productivity level by about 5 percent. However, the effects of trade liberalization on long-term productivity growth rates are found to be statistically insignificant.
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Find related papers by JEL classification: O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies O54 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
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