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The Elusive Productivity Effect of Trade Liberalization in the Manufacturing Industries of Emerging Economies

Author

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  • Berhanu Abegaz
  • Arnab K. Basu

Abstract

Using a model that admits variable returns and imperfect competition, we investigate the impact on total factor productivity of trade liberalization in six emerging economies. Regressions based on panel data for twenty-eight three-digit manufacturing industries show that productivity growth is insensitive to tariff reduction. These results are at variance with country-specific studies that, using firm-level data, generally find a positive association between liberalization and productivity growth. While aggregation effects may matter, our results can also be explained as follows: significant productivity gains by latecomers via technological assimilation do take time and require appropriate sequencing of reforms of trade and industrial policies.

Suggested Citation

  • Berhanu Abegaz & Arnab K. Basu, 2011. "The Elusive Productivity Effect of Trade Liberalization in the Manufacturing Industries of Emerging Economies," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 47(1), pages 5-27, January.
    • Handle: RePEc:mes:emfitr:v:47:y:2011:i:1:p:5-27
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    Cited by:

    1. Weijiang Liu & Mingze Du & Yuxin Bai, 2021. "Mechanisms of Environmental Regulation’s Impact on Green Technological Progress—Evidence from China’s Manufacturing Sector," Sustainability, MDPI, vol. 13(4), pages 1-23, February.
    2. Aleksandra Parteka & Joanna Wolszczak-Derlacz, 2013. "The Impact of Trade Integration with the European Union on Productivity in a Posttransition Economy: The Case of Polish Manufacturing Sectors," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 49(2), pages 84-104, March.
    3. Kravtsova, Victoria & Radosevic, Slavo, 2012. "Are systems of innovation in Eastern Europe efficient?," Economic Systems, Elsevier, vol. 36(1), pages 109-126.
    4. Goran Vukšić, 2016. "Effects of Private Ownership, Trade, and Foreign Direct Investment on Labor Productivity Growth in Transition Economies: Evidence from the Croatian Manufacturing Industry," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 52(2), pages 322-335, February.

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