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Trade and Market Selection: Evidence from Manufacturing Plants in Colombia

Author

Listed:
  • Marcela Eslava

    (Universidad de Los Andes)

  • John Haltiwanger

    (University of Maryland)

  • Adriana Kugler

    (Georgetown University)

  • Maurice Kugler

    (United Nations Development Programme)

Abstract

We examine the link between trade liberalization and aggregate productivity, with a focus on improved market selection resulting from a reduction in trade barriers and in the dispersion of these barriers across producers. Our analysis exploits tariff changes across sectors after the Colombian trade reform. An additional advantage of our analysis is that our TFP measure does not include demand and price effects. We find that reduced trade protection makes plant survival depend more closely on productivity. Using a dynamic simulation, we find that enhanced selection increases aggregate productivity substantially. Trade liberalization also increases productivity of incumbent plants and improves the allocation of activity. We find larger effects on allocative efficiency with our TFP measure than with a traditional measure including price effects. (Copyright: Elsevier)

Suggested Citation

  • Marcela Eslava & John Haltiwanger & Adriana Kugler & Maurice Kugler, 2013. "Trade and Market Selection: Evidence from Manufacturing Plants in Colombia," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 135-158, January.
  • Handle: RePEc:red:issued:11-69
    DOI: 10.1010/j.red.2012.10.009
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    References listed on IDEAS

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    Cited by:

    1. David C. Maré, 2016. "Urban Productivity Estimation with Heterogeneous Prices and Labour," Working Papers 16_21, Motu Economic and Public Policy Research.
    2. Stephane Verani, 2018. "Aggregate Consequences of Dynamic Credit Relationships," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 29, pages 44-67, July.
    3. SEGERSTROM, Paul S. & SUGITA, Yoichi, 2018. "A Solution to the Melitz-Trefler Puzzle," Discussion paper series HIAS-E-63, Hitotsubashi Institute for Advanced Study, Hitotsubashi University.
    4. Timothy Kehoe & Sewon Hur & Kim Ruhl & Jose Asturias, 2016. "Firm Entry and Exit and Aggregate Growth," 2016 Meeting Papers 573, Society for Economic Dynamics.
    5. David L. Rigby & Thomas Kemeny & Abigail Cooke, 2017. "Plant exit and U.S. imports from low-wage countries," International Economics, CEPII research center, issue 149, pages 27-40.
    6. Catherine Fuss & Angelos Theodorakopoulos, 2018. "Compositional changes in aggregate productivity in an era of globalisation and financial crisis," Working Paper Research 336, National Bank of Belgium.
    7. Autor, David & Dorn, David & Hanson, Gordon & Pisano, Gary & Shu, Pian, 2016. "Foreign Competition and Domestic Innovation: Evidence from U.S. Patents," CEPR Discussion Papers 11664, C.E.P.R. Discussion Papers.
    8. Diego Restuccia, 2013. "factor misallocation and development," The New Palgrave Dictionary of Economics, Palgrave Macmillan.
    9. Paul S. Segerstrom & Yoichi Sugita, 2015. "The Impact Of Trade Liberalization On Industrial Productivity," Journal of the European Economic Association, European Economic Association, vol. 13(6), pages 1167-1179, December.
    10. Maria D. Tito & Ruoying Wang, 2017. "Exporting and Frictions in Input Markets : Evidence from Chinese Data," Finance and Economics Discussion Series 2017-077, Board of Governors of the Federal Reserve System (U.S.).
    11. Catalina Granda & Franz Hamann & Cesar E. Tamayo, 2017. "Credit and Saving Constraints in General Equilibrium: Evidence from Survey Data," Borradores de Economia 1002, Banco de la Republica de Colombia.
    12. Alvaro Garcia Marin & Nico Voigtländer, 2013. "Exporting and Plant-Level Efficiency Gains: It's in the Measure," NBER Working Papers 19033, National Bureau of Economic Research, Inc.
    13. Hu, Zhongzhong & Rodrigue, Joel & Tan, Yong & Yu, Chunhai, 2017. "Product Churning, Reallocation, and Chinese Export Growth," MPRA Paper 81813, University Library of Munich, Germany.
    14. Diego Restuccia, 2018. "Misallocation and Aggregate Productivity across Time and Space," Working Papers tecipa-608, University of Toronto, Department of Economics.
    15. Ari Hyytinen & Pekka Ilmakunnas & Mika Maliranta, 2016. "Olley–Pakes productivity decomposition: computation and inference," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 179(3), pages 749-761, June.
    16. Lucia S. Foster & Cheryl A. Grim & John Haltiwanger & Zoltan Wolf, 2017. "Macro and Micro Dynamics of Productivity: From Devilish Details to Insights," Working Papers 17-41r, Center for Economic Studies, U.S. Census Bureau.
    17. Blyde, Juan, 2016. "Exports and Labor Skills: The Role of Training," MPRA Paper 72150, University Library of Munich, Germany.
    18. Stephane Verani, 2018. "Aggregate Consequences of Dynamic Credit Relationships," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 29, pages 44-67, July.
    19. Bert M. Balk, 2015. "Measuring and relating aggregate and subaggregate total factor productivity change without neoclassical assumptions," Statistica Neerlandica, Netherlands Society for Statistics and Operations Research, vol. 69(1), pages 21-48, February.
    20. HAYAKAWA Kazunobu & MATSUURA Toshiyuki, 2017. "Overseas Production Expansion and Domestic Transaction Networks," Discussion papers 17085, Research Institute of Economy, Trade and Industry (RIETI).
    21. repec:bla:deveco:v:55:y:2017:i:3:p:230-249 is not listed on IDEAS

    More about this item

    Keywords

    Trade liberalization; Productivity; Market selection;

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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