Liberalization and Productivity Growth: The Case of Manufacturing Industry in Nepal
The proposition that liberalization improves productivity growth is examined using data from Nepalese manufacturing-a least developed country that implemented trade liberalization during the 1980s. Productivity growth in general was negative in both the preand post-liberalization periods, but a marginal improvement was detected in the latter period in that the decline in productivity growth was arrested. Higher productivity growth took place in industries with relatively large-scale production and foreign investment. The magnitude of the impact of foreign investment, however, depends on the incentive environment. The analysis suggests that, while trade and exchange rate policy reforms may be a necessary condition for improving productivity growth in least developing countries, they are not sufficient. Shortages of human capital and physical infrastructure need to be redressed if potential productivity improvements are to be fully achieved.
Volume (Year): 28 (2000)
Issue (Month): 2 ()
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