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Trade Liberalization and Productivity Growth: Evidence from Indian Manufacturing

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  • Satish Chand
  • Kunal Sen

Abstract

The impact of trade liberalisation on productivity growth is still an empirical issue; the theoretical literature is as yet unclear on the direction of any such association. This paper develops an analytical framework and employs it to empirically test if trade liberalisation in Indian manufacturing has raised total factor productivity (TFP) growth. The answer is in the affirmative. Our results also support a key postulate of the new growth theories that liberalisation of the intermediate good sectors has a larger favourable impact on TFP growth than that of the final good sectors.

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File URL: http://coombs.anu.edu.au/~ecopac/wpaper/wp1996/9611.prn
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Bibliographic Info

Paper provided by Australian National University, Department of Economics in its series Trade and Development with number 96/11.

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Date of creation: Sep 1996
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Handle: RePEc:wop:anuetd:9611

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  1. Horn, H. & Lang, H. & Lundgren, S., 1991. "Managerial Effort Incentives, X-Inefficiency and International Trade," Papers 507, Stockholm - International Economic Studies.
  2. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
  3. Levinsohn, James, 1993. "Testing the imports-as-market-discipline hypothesis," Journal of International Economics, Elsevier, vol. 35(1-2), pages 1-22, August.
  4. Pritchett, Lant, 1996. "Measuring outward orientation in LDCs: Can it be done?," Journal of Development Economics, Elsevier, vol. 49(2), pages 307-335, May.
  5. Islam, Nazrul, 1995. "Growth Empirics: A Panel Data Approach," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 1127-70, November.
  6. Backus, David K. & Kehoe, Patrick J. & Kehoe, Timothy J., 1992. "In search of scale effects in trade and growth," Journal of Economic Theory, Elsevier, vol. 58(2), pages 377-409, December.
  7. Krueger, Anne O. & Tuncer, Baran, 1982. "Growth of factor productivity in Turkish manufacturing industries," Journal of Development Economics, Elsevier, vol. 11(3), pages 307-325, December.
  8. Edwards, Sebastian, 1993. "Openness, Trade Liberalization, and Growth in Developing Countries," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1358-93, September.
  9. Aksoy, M. Ataman, 1992. "The Indian trade regime," Policy Research Working Paper Series 989, The World Bank.
  10. Dani Rodrik, 1992. "The Limits of Trade Policy Reform in Developing Countries," Journal of Economic Perspectives, American Economic Association, vol. 6(1), pages 87-105, Winter.
  11. Havrylyshyn, Oli, 1990. "Trade Policy and Productivity Gains in Developing Countries: A Survey of the Literature," World Bank Research Observer, World Bank Group, vol. 5(1), pages 1-24, January.
  12. Romer, Paul M, 1987. "Growth Based on Increasing Returns Due to Specialization," American Economic Review, American Economic Association, vol. 77(2), pages 56-62, May.
  13. Harrison, Ann E., 1994. "Productivity, imperfect competition and trade reform : Theory and evidence," Journal of International Economics, Elsevier, vol. 36(1-2), pages 53-73, February.
  14. Vousden, Neil, 1993. "Variable Specific Factors and the "X-Efficiency Cost" of Protection," Review of International Economics, Wiley Blackwell, vol. 1(3), pages 234-42, October.
  15. Tybout, James R, 1992. "Linking Trade and Productivity: New Research Directions," World Bank Economic Review, World Bank Group, vol. 6(2), pages 189-211, May.
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