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How trade liberalization affected productivity in Morocco

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  • Haddad, Mona
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    Abstract

    The economic literature now accepts theoretical arguments that liberal, outward-oriented trade policy is better than restrictive, inward-oriented policies. Traditionally such arguments for the gains from trade have rested on the concept of allocative efficiency. But a new argument for liberal trade has emerged: increased technical efficiency or productivity. The best-known attempts to link trade policy and productivity are based on X-efficiency, economies of scale, capacity use, increased competition, and technological catch-up. The author estimates total factor productivity (TFP) at thefirm level using panel data from the Moroccan industrial census in a production-funtion framework during Morocco's period of trade liberalization (1984-89). The author corrected for several problems that usually bias the estimate of productivity. The use of panel data allowed her to take into account the heterogeneity across firms. These firm-specific effects were tested for randomness. Differences between large firms and small firms were checked. She also corrected for errors in measuring capital stock, so common in data from developing countries, and for simultaneity bias because of the endogeneity of factor inputs or because managers have some knowledge about the noise in the production function. The author then estimated the effect of various trade and market-structure variables on the level of TFP, as well as on the deviation of firm TFP from the efficiency frontier. The results are not very sensitive to the different measures of TFP and show that trade openness has a significant positive effect on firm productivity through: outward orientation from export promotion; import liberalization; and more direct foreign investment. By splitting the sample into protected and unprotected sectors, the author showed lower productivity in protected sectors. The results are clear. Trade liberalization in Morocco improved productivity in manufacturing firms, so they could exploit their comparative advantage and compete better with foreign firms.

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    Bibliographic Info

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1096.

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    Date of creation: 28 Feb 1993
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    Handle: RePEc:wbk:wbrwps:1096

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    Keywords: Environmental Economics&Policies; Economic Theory&Research; TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT; Banks&Banking Reform; Industrial Management;

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    References

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    1. Kumbhakar, Subal C., 1987. "The specification of technical and allocative inefficiency in stochastic production and profit frontiers," Journal of Econometrics, Elsevier, vol. 34(3), pages 335-348, March.
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      • Edward E. Leamer, 1988. "Measures of Openness," NBER Chapters, in: Trade Policy Issues and Empirical Analysis, pages 145-204 National Bureau of Economic Research, Inc.
    15. Schmalensee, Richard., 1987. "Inter-industry studies of structure and performance," Working papers 1874-87., Massachusetts Institute of Technology (MIT), Sloan School of Management.
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    Citations

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    Cited by:
    1. Bee Yan Aw & Sukkyun Chung & Mark J. Roberts, 1998. "Productivity and the Decision to Export: Micro Evidence from Taiwan and South Korea," NBER Working Papers 6558, National Bureau of Economic Research, Inc.
    2. Jin-Tan Liu & Meng-Wen Tsou & James Hammitt, 1999. "Export activity and productivity: Evidence from the Taiwan electronics industry," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 135(4), pages 675-691, December.
    3. Chin Hee Hahn, 2004. "Exporting and Performance of Plants: Evidence from Korean Manufacturing," NBER Working Papers 10208, National Bureau of Economic Research, Inc.
    4. Patricia Augier & Michael Gasiorek & Gonzalo Varela, 2007. "Determinants of Productivity in Morocco - The Role of Trade?," CARIS Working Papers 02, Centre for the Analysis of Regional Integration at Sussex, University of Sussex.
    5. Deb Kusum Das, 2007. "Trade Liberalization and Industrial Productivity: An Assessment of Developing Country Experiences," Working Papers id:1009, eSocialSciences.
    6. Paul Collier & Marcel Fafchamps & Francis Teal & Stefan Dercon, 2002. "Do African Manufacturing Firms Learn from Exporting?," Economics Series Working Papers WPS/2002-09, University of Oxford, Department of Economics.
    7. James Tybout, 1998. "Manufacturing Firms In Developing Countries: How Well Do They Do, And Why?," Development and Comp Systems 9805004, EconWPA.
    8. Ahmed, Qazi Masood & Hyder, Kalim, 2007. "Determinants of Total Factor Productivity in Pakistan," MPRA Paper 16253, University Library of Munich, Germany, revised Jun 2007.
    9. Sofronis Clerides & Saul Lach & James Tybout, 1996. "Is "learning-by-exporting" important? Micro-dynamic evidence from Colombia, Mexico and Morocco," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 96-30, Board of Governors of the Federal Reserve System (U.S.).
    10. Aw, B. -Y. & Hwang, A. R., 1995. "Productivity and the export market: A firm-level analysis," Journal of Development Economics, Elsevier, vol. 47(2), pages 313-332, August.
    11. Bee Yan Aw & Xiaomin Chen & Mark J. Roberts, 1997. "Firm-level Evidence on Productivity Differentials, Turnover, and Exports in Taiwanese Manufacturing," NBER Working Papers 6235, National Bureau of Economic Research, Inc.

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