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Trade Liberalization and Productivity-A Panel Study of the Mexican Manufacturing Industry

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  • Talan Iscan

    () (Department of Economics, Dalhousie University)

Abstract

In recent years there has been a revival of interest in the trade-growth nexus. A number of authors have suggested that regional economic integration and liberalization of international trade are likely to have positive effects not only on productivity levels but also on long-term productivity growth rates in developing countries. Using a panel of Mexican manufacturing industries, this paper examines several alternative mechanisms through which trade contributes positively to productivity levels and growth rates. Special attention is paid to the comprehensive trade liberalization policies implemented in Mexico after 1986. The results indicate that productivity growth is significantly correlated with the share of imported intermediate inputs in sectoral output. Reductions in rates of protection are found to have significant positive effects on sectoral productivity levels. The estimates also suggest that after liberalization increasing share of exports in total output increased average productivity level by about 5 percent. However, the effects of trade liberalization on long-term productivity growth rates are found to be statistically insignificant.

Suggested Citation

  • Talan Iscan, 1998. "Trade Liberalization and Productivity-A Panel Study of the Mexican Manufacturing Industry," Department of Economics at Dalhousie University working papers archive tradelib, Dalhousie, Department of Economics.
  • Handle: RePEc:dal:wparch:tradelib
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    Cited by:

    1. Narayan, Seema & Narayan, Paresh Kumar & Mishra, Sagarika, 2010. "Investigating the relationship between health and economic growth: Empirical evidence from a panel of 5 Asian countries," Journal of Asian Economics, Elsevier, vol. 21(4), pages 404-411, August.
    2. Steven M. Fazzari, "undated". "Capital Income Taxes and Economic Performance," Economics Policy Note Archive 99-7, Levy Economics Institute.
    3. 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.
    4. Marwah, Kanta & Tavakoli, Akbar, 2004. "The effect of foreign capital and imports on economic growth: further evidence from four Asian countries (1970-1998)," Journal of Asian Economics, Elsevier, vol. 15(2), pages 399-413, April.
    5. Kanta Marwah & Akbar Tavakoli, 2004. "The Effect of Foreign Capital and Imports on Economic Growth: Further Evidence from Four Asian Countries," Carleton Economic Papers 04-02, Carleton University, Department of Economics.
    6. Bakari, Sayef, 2016. "Impact of Exports and Imports on Economic Growth in Canada: Empirical Analysis Based on Causality," MPRA Paper 75910, University Library of Munich, Germany.
    7. Faundez, Sebastian & Mulder, Nanno & Carpentier, Nicole, 2011. "Productivity growth in Latin American manufacturing: what role for international trade intensities?," MPRA Paper 36507, University Library of Munich, Germany.
    8. Klaus Wälde & Christina Wood, 2004. "The empirics of trade and growth: where are the policy recommendations?," International Economics and Economic Policy, Springer, vol. 1(2), pages 275-292, January.
    9. Mohammad Mafizur Rahman & Muhammad Shahbaz, 2013. "Do Imports and Foreign Capital Inflows Lead Economic Growth? Cointegration and Causality Analysis in Pakistan," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 14(1), pages 59-81, March.
    10. Schor, Adriana, 2004. "Heterogeneous productivity response to tariff reduction. Evidence from Brazilian manufacturing firms," Journal of Development Economics, Elsevier, vol. 75(2), pages 373-396, December.
    11. Echavarría Juan José & María Angélica Arbeláez & María Fernanda Rosales, 2006. "La productividad y sus determinantes:el caso de la industria colombiana," REVISTA DESARROLLO Y SOCIEDAD, UNIVERSIDAD DE LOS ANDES-CEDE, June.
    12. World Bank, 2001. "Mexico : Technology, Wages and Employment, Volume 1. Main Document," World Bank Other Operational Studies 15432, The World Bank.
    13. Jayanthakumaran, Kankesu, 2002. "The Impact of Trade Liberalisation on Manufacturing Sector Performance in Developing Countries: A Survey of the Literature," Economics Working Papers wp02-07, School of Economics, University of Wollongong, NSW, Australia.
    14. Asma Arif & Hasnat Ahmad, 2012. "Impact of Trade Openness on Output Growth: Co integration and Error Correction Model Approach," International Journal of Economics and Financial Issues, Econjournals, vol. 2(4), pages 379-385.
    15. Deb Kusum Das, 2007. "Trade Liberalization and Industrial Productivity: An Assessment of Developing Country Experiences," Working Papers id:1009, eSocialSciences.
    16. repec:spr:manint:v:51:y:2011:i:5:d:10.1007_s11575-011-0093-0 is not listed on IDEAS
    17. Lopez-Acevedo,Gladys C., 2002. "Determinants of technology adoption in Mexico," Policy Research Working Paper Series 2780, The World Bank.
    18. Muhammad Shahbaz & Mohammad Mafizur Rahman, 2012. "The Dynamic of Financial Development, Imports, Foreign Direct Investment and Economic Growth: Cointegration and Causality Analysis in Pakistan," Global Business Review, International Management Institute, vol. 13(2), pages 201-219, June.
    19. 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.
    20. World Bank, 2001. "Mexico : Technology, Wages and Employment, Volume 2. Technical Papers," World Bank Other Operational Studies 15433, The World Bank.
    21. Uwe Deichmann & Marianne Fay & Jun Koo & Somik V. Lall, 2004. "Economic structure, productivity, and infrastructure quality in Southern Mexico," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 38(3), pages 361-385, September.
    22. Montes-Rojas, Gabriel & Santamaria, Mauricio, 2007. "Sources of productivity growth: Evidence from the Mexican manufacturing sector," The North American Journal of Economics and Finance, Elsevier, vol. 18(3), pages 263-278, December.
    23. Bakari, Sayef, 2017. "The Nexus between Export, Import, Domestic Investment and Economic Growth in Japan," MPRA Paper 76110, University Library of Munich, Germany.
    24. Adriana Schor, 2004. "Heterogeneous Productivity Response to Tariff Reduction: Evidence from Brazilian Manufacturing Firms," NBER Working Papers 10544, National Bureau of Economic Research, Inc.
    25. Mollick, André Varella & Cabral, René, 2009. "Productivity effects on Mexican manufacturing employment," The North American Journal of Economics and Finance, Elsevier, vol. 20(1), pages 66-81, March.

    More about this item

    Keywords

    trade liberalization; productivity; growth; Mexican manufacturing industry;

    JEL classification:

    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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