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

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  • Giorgio Barba Navaretti
  • Riccardo Faini
  • Bernard Gauthier

Abstract

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.

Suggested Citation

  • Giorgio Barba Navaretti & Riccardo Faini & Bernard Gauthier, 2006. "The Impact of Trade Liberalization on Enterprises in Small Backward Economies: the Case of Chad and Gabon," Review of Development Economics, Wiley Blackwell, vol. 10(3), pages 452-465, August.
  • Handle: RePEc:bla:rdevec:v:10:y:2006:i:3:p:452-465
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    References listed on IDEAS

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    1. Baldwin, Richard, 1988. "Hyteresis in Import Prices: The Beachhead Effect," American Economic Review, American Economic Association, vol. 78(4), pages 773-785, September.
    2. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    3. Francisco Alcalá & Antonio Ciccone, 2004. "Trade and Productivity," The Quarterly Journal of Economics, Oxford University Press, vol. 119(2), pages 613-646.
    4. Shantayanan Devarajan & Dani Rodrik, 1991. "Do the Benefits of Fixed Exchange Rates Outweigh Their Costs? The Franc Zone in Africa," NBER Working Papers 3727, National Bureau of Economic Research, Inc.
    5. Richard Baldwin & Paul Krugman, 1989. "Persistent Trade Effects of Large Exchange Rate Shocks," The Quarterly Journal of Economics, Oxford University Press, vol. 104(4), pages 635-654.
    6. Dixit, Avinash K, 1989. "Entry and Exit Decisions under Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 620-638, June.
    7. 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.
    8. 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.
    9. Chambers,Robert G., 1988. "Applied Production Analysis," Cambridge Books, Cambridge University Press, number 9780521314275.
    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. 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.
    12. repec:mes:challe:v:31:y:1988:i:4:p:56-58 is not listed on IDEAS
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    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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