Productivity response to reduction in trade barriers: Evidence from Turkish manufacturing plants
AbstractWe examine the effects of trade policy changes on the evolution of plant productivity. Plant level productivities are estimated for the 1983-96 period following the procedure of Olley and Pakes (1996). Industry averages indicate that productivity gains are largest in import competing industries with highest gains reaching to 8% per year during periods of rapid decline in protection rates. A decomposition of industry level productivity gains also suggests important differences across sectors by trade orientation. Though reallocation of market shares to more productive plants are important in both export oriented, and import competing sectors, within plant productivity improvements are significant only in export-oriented sectors. We also investigate the effects of changes in protection rates on plant level productivities using regressions that control for endogeneity of protection rates (tariff and non-tariff). We find that productivity improvements resulting from declining protection levels are statistically significant and economically important, especially in import competing sectors. This analysis also suggests that there is a huge degree of heterogeneity, measured by plant size, in response to changes in protection rates.
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Bibliographic InfoPaper provided by Koc University-TUSIAD Economic Research Forum in its series Koç University-TUSIAD Economic Research Forum Working Papers with number 0704.
Length: 36 pages
Date of creation: Jan 2007
Date of revision:
Production function; semi-parametric estimation; protection; import penetration; domestic competition.;
Other versions of this item:
- Sule Ozler & Kamil Yilmaz, 2009. "Productivity response to reduction in trade barriers: evidence from Turkish manufacturing plants," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 145(2), pages 339-360, July.
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-11-17 (All new papers)
- NEP-EFF-2007-11-17 (Efficiency & Productivity)
- NEP-INT-2007-11-17 (International Trade)
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