IDEAS home Printed from https://ideas.repec.org/p/pas/papers/2021-21.html

The heterogeneous impact of tariff and non-tariff measures on total factor productivity on Indonesia firms

Author

Listed:
  • Krisna Gupta

Abstract

Indonesian government has been working hard in engaging with the world market as average tariff keeps on decreasing. However, it seems to rely on Non-Tariff Measures (NTM) rather than tariffs to protect its industries. This paper inspects whether these measures hurt firms by limiting their access to better quality and cheaper foreign inputs. This paper builds on Amiti and Konings (2007) to inspect the impact of trade policy shocks to firm s Total Factor Productivity (TFP). The results suggest unintended consequences of protectionism: tariff and NTMs hurt firms TFP and labour absorption significantly. The impact is less severe for bigger firms, confirming heterogeneous effect of trade policy. As the country is looking to boost foreign investment, the paper makes a strong case for reducing protection to keep mark-up in domestic manufacturing high as an incentive.

Suggested Citation

  • Krisna Gupta, 2021. "The heterogeneous impact of tariff and non-tariff measures on total factor productivity on Indonesia firms," Departmental Working Papers 2021-21, The Australian National University, Arndt-Corden Department of Economics.
    • Handle: RePEc:pas:papers:2021-21
    as

    Download full text from publisher

    File URL: https://crawford.anu.edu.au/sites/default/files/2025-02/acde_gupta_2021_21.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Rodrik, Dani, 2020. "Why Does Globalization Fuel Populism?," CEPR Discussion Papers 15002, Centre for Economic Policy Research.
    2. Hiau LooiKee & Alessandro Nicita & Marcelo Olarreaga, 2009. "Estimating Trade Restrictiveness Indices," Economic Journal, Royal Economic Society, vol. 119(534), pages 172-199, January.
    3. Martha Denisse Pierola & Ana Margarida Fernandes & Thomas Farole, 2018. "The role of imports for exporter performance in Peru," The World Economy, Wiley Blackwell, vol. 41(2), pages 550-572, February.
    4. Deardorff, Alan V., 1987. "Why do governments prefer nontariff barriers?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 26(1), pages 191-216, January.
    5. Mari Pangestu & Sjamsu Rahardja & Lili Yan Ing, 2015. "Fifty Years Of Trade Policy In Indonesia: New World Trade, Old Treatments," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 51(2), pages 239-261, August.
    6. repec:wbk:wbpubs:32437 is not listed on IDEAS
    7. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(2), pages 317-341.
    8. Kis-Katos, Krisztina & Sparrow, Robert, 2015. "Poverty, labor markets and trade liberalization in Indonesia," Journal of Development Economics, Elsevier, vol. 117(C), pages 94-106.
    9. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-1297, November.
    10. Olivier Cadot & Alan Asprilla & Julien Gourdon & Ralph Peters & Christian Knebel, 2015. "Deep Regional Integration And Non-Tariff Measures: A Methodology For Data Analysis," UNCTAD Blue Series Papers 69, United Nations Conference on Trade and Development.
    11. Alan V. Deardorff & Robert M. Stern, 1997. "Measurement of Non-Tariff Barriers," OECD Economics Department Working Papers 179, OECD Publishing.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Massimiliano Calì & Marco Le Moglie & Giorgio Presidente, 2024. "Gain without pain? Non‐tariff measures, plant markup, and productivity," Review of International Economics, Wiley Blackwell, vol. 32(3), pages 1364-1397, August.
    2. Cali,Massimiliano & Le Moglie,Marco & Presidente,Giorgio, 2021. "Gain without Pain ? Non-Tariff Measures, Plants’ Productivity and Markups," Policy Research Working Paper Series 9654, The World Bank.
    3. Grant, Jason & Arita, Shawn, "undated". "Sanitary and Phyto-Sanitary Measures: Assessment, Measurement, and Impact," Commissioned Papers 259417, International Agricultural Trade Research Consortium.
    4. Torres Mazzi, Caio & Foster-McGregor, Neil & Estefânia de Sousa Ferreira, Glaucia, 2021. "Production fragmentation and upgrading opportunities for exporters: An empirical assessment of the case of Brazil," World Development, Elsevier, vol. 138(C).
    5. Deasy D. Pane & Arianto A. Patunru, 2023. "The role of imported inputs in firms’ productivity and exports: evidence from Indonesia," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 159(3), pages 629-672, August.
    6. Oleksandr Shepotylo & Volodymyr Vakhitov & Veronika Movchan & Mariia Panga, 2022. "Non‐tariff measures and productivity of Ukrainian food‐processing firms," Journal of Agricultural Economics, Wiley Blackwell, vol. 73(1), pages 234-256, February.
    7. Martina Francesca Ferracane & Janez Kren & Erik van der Marel, 2020. "Do data policy restrictions impact the productivity performance of firms and industries?," Review of International Economics, Wiley Blackwell, vol. 28(3), pages 676-722, August.
    8. Carlos Casacuberta & Dayna Zaclicever, 2015. "The Effect of Trade Protection on Productivity in Uruguay," Documentos de Trabajo (working papers) 0215, Department of Economics - dECON.
    9. Riandy Laksono & Arianto A. Patunru, 2024. "The dynamics of labor share decline in manufacturing: Evidence from Indonesia," Departmental Working Papers 2024-3, The Australian National University, Arndt-Corden Department of Economics.
    10. Toshiyuki Matsuura & Hisamitsu Saito, 2023. "Foreign direct investment and labor demand by skill in Indonesian manufacturing firms," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 159(4), pages 921-941, November.
    11. Yang, Yong & Mallick, Sushanta, 2014. "Explaining cross-country differences in exporting performance: The role of country-level macroeconomic environment," International Business Review, Elsevier, vol. 23(1), pages 246-259.
    12. Massimo Colombo & Annalisa Croce & Samuele Murtinu, 2014. "Ownership structure, horizontal agency costs and the performance of high-tech entrepreneurial firms," Small Business Economics, Springer, vol. 42(2), pages 265-282, February.
    13. Roberto Martino & Phu Nguyen-Van, 2014. "Labour market regulation and fiscal parameters: A structural model for European regions," Working Papers of BETA 2014-19, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    14. Zhu, Ling & Liu, Shasha & Kong, Dongmin, 2023. "Governments' fiscal stress and firm decentralization," International Review of Financial Analysis, Elsevier, vol. 90(C).
    15. Jan De Loecker & Jozef Konings, 2003. "Creative Destruction and Productivity Growth in an Emerging Economy Evidence from Slovenian Manufacturing," LICOS Discussion Papers 13803, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
    16. Weili Li, 2025. "RETRACTED ARTICLE: Optimizing Enterprise Productivity in the Digital Economy: A Genetic Algorithm and Multi-Objective Approach," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 16(1), pages 2670-2688, March.
    17. Klaus S. Friesenbichler & Agnes Kügler, 2026. "Short and medium-term effects of intangible capital on firm growth: firm-level evidence from austrian microdata," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 53(1), pages 113-148, February.
    18. Yoko KONISHI & Yoshihiko NISHIMURA, 2013. "A Note on the Identification of Demand and Supply Shocks in Production: Decomposition of TFP," Discussion papers 13099, Research Institute of Economy, Trade and Industry (RIETI).
    19. Matteo G. Richiardi & Luis Valenzuela, 2024. "Firm heterogeneity and the aggregate labour share," LABOUR, CEIS, vol. 38(1), pages 66-101, March.
    20. David Van Dijcke, 2022. "On the Non-Identification of Revenue Production Functions," Papers 2212.04620, arXiv.org, revised May 2024.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pas:papers:2021-21. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Prema-chandra Athukorala (email available below). General contact details of provider: https://edirc.repec.org/data/asanuau.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.