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

  • Alfons Palangkaraya

    ()

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

  • Jongsay Yong

    ()

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

We use unpublished establishment level data of Australian manufacturing from 1993-94 and 1996-97 censuses to study how trade liberalisation affects productivity. More specifically, we use the variation in the extent of trade liberalisation across four digit ANZSIC manufacturing industries classification to identify the link between trade liberalisation and three outcomes: establishments’ probability of exit, the change in the size of output and the change in employment. There is weak evidence that establishments in industries with greater reductions in effective rate of assistance are more likely to exit. We find strong evidence that they reduce employment. There is no evidence for economies of scale through output expansion. Together these indicate that the documented productivity gains of trade liberalisation may 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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Paper provided by Melbourne Institute of Applied Economic and Social Research, The University of Melbourne in its series Melbourne Institute Working Paper Series with number wp2007n16.

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Length: 30 pages
Date of creation: May 2007
Date of revision:
Handle: RePEc:iae:iaewps:wp2007n16
Contact details of provider: Postal: Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Victoria 3010 Australia
Phone: +61 3 8344 2100
Fax: +61 3 8344 2111
Web page: http://www.melbourneinstitute.com/
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  1. 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.
  2. Gibson,J.K. & Harris,R.I.D., 1996. "Trade Liberalisation and Plant Exit in New Zealand Manufacturing," Papers 66, Portsmouth University - Department of Economics.
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  18. 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.
  19. 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.
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  26. repec:rus:hseeco:122439 is not listed on IDEAS
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