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Trade policy reform and firm-level productivity growth: Does the choice of production function matter?

Author

Listed:
  • John Kealey
  • Pau S. Pujolas
  • Cesar Sosa-Padilla

Abstract

This paper considers whether a fairly well-established empirical relationship between liberalized trade and firm productivity growth is sensitive to the choice of an identification strategy for production function estimation. We estimate the productivity of Colombian manufacturing plants using the methods of Levinsohn and Petrin (2003), Ackerberg, Caves, and Frazer (2006), and Gandhi, Navarro, and Rivers (2012), and at times come to surprisingly different conclusions about the country's experience with trade policy reform during the 1980s. Results from a quantile regression model and a productivity growth decomposition exercise tend to vary as we experiment with different specifcations of the production function. Research that is concerned with the short and medium-term impact of trade liberalization on domestic manufacturing industries should therefore pay close attention to issues of robustness to alternative strategies for estimating the productivity of firms.

Suggested Citation

  • John Kealey & Pau S. Pujolas & Cesar Sosa-Padilla, 2016. "Trade policy reform and firm-level productivity growth: Does the choice of production function matter?," Department of Economics Working Papers 2016-08, McMaster University.
  • Handle: RePEc:mcm:deptwp:2016-08
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    File URL: http://socserv.mcmaster.ca/econ/rsrch/papers/archive/McMasterEconWP2016-08.pdf
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    More about this item

    Keywords

    Trade liberalization; production function estimation;

    JEL classification:

    • F1 - International Economics - - Trade
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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