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The Impact of Trade Liberalization on Enterprises in Small Backward Economies: the Case of Chad and Gabon

  • Giorgio Barba Navaretti
  • Riccardo Faini
  • Bernard Gauthier

This paper examines the impact of trade and fiscal reforms and of the 1994 devaluation of the CFA franc on enterprise development in Chad and Gabon. These reforms provide a natural experiment to assess the impact of trade liberalization in countries with a small and backward manufacturing sector. The empirical analysis is based on a new panel data base covering virtually the whole population of manufacturing firms in Chad and Gabon, and containing data spanning from the year before to two years after the reforms. The paper finds that although firms' response to changing incentives was non-negligible, with a shift of output from nontradable to tradable and an increase in productivity, the reform process was unable to generate a virtuous and self-sustained circle, where export expansion brings a generalized productivity increase which in turn feeds on further export growth. Copyright � 2006 The Authors; Journal compilation � 2006 Blackwell Publishing Ltd.

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Article provided by Wiley Blackwell in its journal Review of Development Economics.

Volume (Year): 10 (2006)
Issue (Month): 3 (08)
Pages: 452-465

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Handle: RePEc:bla:rdevec:v:10:y:2006:i:3:p:452-465
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  1. Richard Baldwin, 1988. "Hysteresis In Import Prices: The Beachhead Effect," NBER Working Papers 2545, National Bureau of Economic Research, Inc.
  2. Francisco Alcalá & Antonio Ciccone, 2003. "Trade and Productivity," Working Papers 12, Barcelona Graduate School of Economics.
  3. Tybout, James, et al, 1997. "Firm-Level Responses to the CFA Devaluation in Cameroon," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 6(1), pages 3-34, March.
  4. Bernard Gauthier & Isidro Soloaga & James Tybout, 2002. "A Firm's-Eye View of Commercial Policy and Fiscal Reforms in Cameroon," World Bank Economic Review, World Bank Group, vol. 16(3), pages 449-472, December.
  5. Devarajan, Shantayanan & de Melo, Jaime, 1990. "Membership in the CFA zone : Odyssean journey or Trojan horse?," Policy Research Working Paper Series 482, The World Bank.
  6. Richard Baldwin & Paul R. Krugman, 1986. "Persistent Trade Effects of Large Exchage Rate Shocks," NBER Working Papers 2017, National Bureau of Economic Research, Inc.
  7. Dixit, A., 1988. "Entry And Exit Decisions Under Uncertainty," Papers 91, Princeton, Department of Economics - Financial Research Center.
  8. Mark J. Melitz, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," NBER Working Papers 8881, National Bureau of Economic Research, Inc.
  9. Chambers,Robert G., 1988. "Applied Production Analysis," Cambridge Books, Cambridge University Press, number 9780521314275, October.
  10. Devarajan, Shantayanan & de Melo, Jaime, 1987. "Evaluating participation in African monetary unions: A statistical analysis of the CFA Zones," World Development, Elsevier, vol. 15(4), pages 483-496, April.
  11. Devarajan, Shantayanan & Rodrik, Dani, 1991. "Do the benefits of fixed exchange rates outweigh their costs? The Franc Zone in Africa," Policy Research Working Paper Series 777, The World Bank.
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