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Trade Liberalisation, Exit, and Output and Employment Adjustments of Australian Manufacturing Establishments

  • Alfons Palangkaraya
  • Jongsay Yong

Using Australian manufacturing establishment data from 1993-94 and 1996-97, we study three possible sources of productivity gains from trade liberalisation: the exit of inefficient establishments, economies of scale from output expansion, and reduction in employment. We find weak evidence that establishments in industries with greater reductions in effective rate of assistance are more likely to exit, strong evidence that they reduce employment, and no evidence for economies of scale through output expansion. Thus the productivity gains appear to come more from the pro-competitive effects which forces establishments to reduce their slackness rather than from the exit of less efficient establishments.

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File URL: http://degit.sam.sdu.dk/papers/degit_12/C012_026.pdf
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Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c012_026.

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Length: 28 pages
Date of creation: Jun 2007
Date of revision:
Handle: RePEc:deg:conpap:c012_026
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  1. Andrew B. Bernard & J. Bradford Jensen, 2002. "The Deaths of Manufacturing Plants," NBER Working Papers 9026, National Bureau of Economic Research, Inc.
  2. Pavcnik, Nina, 2002. "Trade Liberalization, Exit, and Productivity Improvement: Evidence from Chilean Plants," Review of Economic Studies, Wiley Blackwell, vol. 69(1), pages 245-76, January.
  3. 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.
  4. Gibson,J.K. & Harris,R.I.D., 1996. "Trade Liberalisation and Plant Exit in New Zealand Manufacturing," Papers 66, Portsmouth University - Department of Economics.
  5. Tybout, James, 1998. "Manufacuring firms in developing countries - how well do they do, and why?," Policy Research Working Paper Series 1965, The World Bank.
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  8. Harry Bloch & James McDonald, 2001. "Import Competition and Labor Productivity," Journal of Industry, Competition and Trade, Springer, vol. 1(3), pages 301-319, September.
  9. 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.
  10. David Cox & Richard Harris, 1983. "Trade Liberalization and Industrial Organization: Some Estimates for Canada," Working Papers 523, Queen's University, Department of Economics.
  11. G. Steven Olley & Ariel Pakes, 1992. "The Dynamics of Productivity in the Telecommunications Equipment Industry," NBER Working Papers 3977, National Bureau of Economic Research, Inc.
  12. Ana Fernandes, 2002. "Trade Policy, Trade Volumes and Plant-Level Productivity in Colombian Manufacturing Industries," Working Papers 847, Economic Growth Center, Yale University.
  13. Dani Rodrik, 1988. "Imperfect Competition, Scale Economies, and Trade Policy in Developing Countries," NBER Chapters, in: Trade Policy Issues and Empirical Analysis, pages 109-144 National Bureau of Economic Research, Inc.
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  15. Renuka Mahadevan, 2002. "Trade liberalization and productivity growth in Australian manufacturing industries," Atlantic Economic Journal, International Atlantic Economic Society, vol. 30(2), pages 170-185, June.
  16. repec:rus:hseeco:122439 is not listed on IDEAS
  17. Bee Yan Aw & Xiaomin Chen & Mark J. Roberts, 1997. "Firm-level Evidence on Productivity Differentials, Turnover, and Exports in Taiwanese Manufacturing," NBER Working Papers 6235, National Bureau of Economic Research, Inc.
  18. Head, Keith & Ries, John, 1999. "Rationalization effects of tariff reductions," Journal of International Economics, Elsevier, vol. 47(2), pages 295-320, April.
  19. Dierickx, I. & Matutes, C. & Neven, D., 1991. "Cost differences and survival in declining industries : A case for 'picking winners'?," European Economic Review, Elsevier, vol. 35(8), pages 1507-1528, December.
  20. Chand, Satish, 1999. "Trade Liberalization and Productivity Growth: Time-Series Evidence from Australian Manufacturing," The Economic Record, The Economic Society of Australia, vol. 75(228), pages 28-36, March.
  21. Gaston, Noel, 1998. "The Impact of International Trade and Protection on Australian Manufacturing Employment," Australian Economic Papers, Wiley Blackwell, vol. 37(2), pages 119-36, June.
  22. Edward Oczkowski & Kishor Sharma, 2001. "Imperfect Competition, Returns To Scale and Productivity Growth In Australian Manufacturing: A Smooth Transition Approach To Trade Liberalisation," International Economic Journal, Taylor & Francis Journals, vol. 15(2), pages 99-113, June.
  23. Jen Baggs, 2005. "Firm survival and exit in response to trade liberalization," Canadian Journal of Economics, Canadian Economics Association, vol. 38(4), pages 1364-1383, November.
  24. Ghemawat, Pankaj & Nalebuff, Barry, 1990. "The Devolution of Declining Industries," The Quarterly Journal of Economics, MIT Press, vol. 105(1), pages 167-86, February.
  25. Adriana Schor, 2004. "Heterogeneous Productivity Response to Tariff Reduction: Evidence from Brazilian Manufacturing Firms," NBER Working Papers 10544, National Bureau of Economic Research, Inc.
  26. Holmes, Thomas J. & Jr., James A. Schmitz, 2001. "A gain from trade: From unproductive to productive entrepreneurship," Journal of Monetary Economics, Elsevier, vol. 47(2), pages 417-446, April.
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