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Trade liberalization and inter-industry productivity spillovers: an analysis of the 1989-1998 Brazilian trade liberalization episode

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  • Paz, Lourenco

Abstract

The desire to increase manufacturing productivity has been a commonly cited goal of the trade liberalization episodes that have swept several developing countries since the 1980s. The literature has found evidence supporting such an increase in productivity. However, this paper finds that the methodology used in the literature ignores inter-industry productivity spillovers and suggests that this omission biases estimates of the impact of import tariff reduction on industry-level productivity. The findings from a case study of the Brazilian trade liberalization episode (1989-1998) indicate that the literature has overestimated the direct effect of trade liberalization by at least 25%, and that inter-industry productivity spillovers exist, are positive, and account for 70% of the increase in productivity that results from a reduction in import tariffs.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 38859.

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Date of creation: 15 Feb 2012
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Handle: RePEc:pra:mprapa:38859

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Keywords: productivity; trade liberalization; Brazil; spillovers;

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  1. Mary Amiti & Jozef Konings, 2007. "Trade Liberalization, Intermediate Inputs, and Productivity: Evidence from Indonesia," American Economic Review, American Economic Association, American Economic Association, vol. 97(5), pages 1611-1638, December.
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  3. Nina Pavcnik, 2000. "Trade Liberalization, Exit, and Productivity Improvements: Evidence from Chilean Plants," NBER Working Papers 7852, National Bureau of Economic Research, Inc.
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  6. Fernandes, Ana M., 2007. "Trade policy, trade volumes and plant-level productivity in Colombian manufacturing industries," Journal of International Economics, Elsevier, Elsevier, vol. 71(1), pages 52-71, March.
  7. Beata K. Smarzynska, 2003. "Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers through Backward Linkages," William Davidson Institute Working Papers Series, William Davidson Institute at the University of Michigan 548, William Davidson Institute at the University of Michigan.
  8. Wolfgang Keller, 2009. "International Trade, Foreign Direct Investment, and Technology Spillovers," NBER Working Papers 15442, National Bureau of Economic Research, Inc.
  9. Muendler, Marc-Andreas, 2004. "Trade, Technology, and Productivity: A Study of Brazilian Manufacturers, 1986-1998," University of California at San Diego, Economics Working Paper Series, Department of Economics, UC San Diego qt6m96c2r7, Department of Economics, UC San Diego.
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  11. Pinelopi Goldberg & Amit Khandelwal & Nina Pavcnik & Petia Topalova, 2009. "Imported Intermediate Inputs and Domestic Product Growth: Evidence from India," Working Papers, Princeton University, Department of Economics, Center for Economic Policy Studies. 1179, Princeton University, Department of Economics, Center for Economic Policy Studies..
  12. Petia Topalova & Amit Khandelwal, 2011. "Trade Liberalization and Firm Productivity: The Case of India," The Review of Economics and Statistics, MIT Press, vol. 93(3), pages 995-1009, August.
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  15. Moreno, Rosina & López-Bazo, Enrique & Vaya, Esther & Artís, Manuel, 2000. "External Effects And Cost Of Production," ERSA conference papers ersa00p193, European Regional Science Association.
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  17. Kelejian, Harry H. & Prucha, Ingmar R., 2007. "HAC estimation in a spatial framework," Journal of Econometrics, Elsevier, Elsevier, vol. 140(1), pages 131-154, September.
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  19. Pedro Cavalcanti Ferreira & JosÈ Luiz Rossi, 2003. "New Evidence from Brazil on Trade Liberalization and Productivity Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(4), pages 1383-1405, November.
  20. Elhorst, J. Paul, 2010. "Dynamic panels with endogenous interaction effects when T is small," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 40(5), pages 272-282, September.
  21. Markusen, James R, 1989. "Trade in Producer Services and in Other Specialized Intermediate Inputs," American Economic Review, American Economic Association, American Economic Association, vol. 79(1), pages 85-95, March.
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Cited by:
  1. Peng, Ling & Hong, Yongmiao, 2013. "Productivity spillovers among linked sectors," China Economic Review, Elsevier, Elsevier, vol. 25(C), pages 44-61.

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