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How trade liberalization affected productivity in Morocco

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  • Haddad, Mona

Abstract

The economic literature now accepts theoretical arguments that liberal, outward-oriented trade policy is better than restrictive, inward-oriented policies. Traditionally such arguments for the gains from trade have rested on the concept of allocative efficiency. But a new argument for liberal trade has emerged: increased technical efficiency or productivity. The best-known attempts to link trade policy and productivity are based on X-efficiency, economies of scale, capacity use, increased competition, and technological catch-up. The author estimates total factor productivity (TFP) at thefirm level using panel data from the Moroccan industrial census in a production-funtion framework during Morocco's period of trade liberalization (1984-89). The author corrected for several problems that usually bias the estimate of productivity. The use of panel data allowed her to take into account the heterogeneity across firms. These firm-specific effects were tested for randomness. Differences between large firms and small firms were checked. She also corrected for errors in measuring capital stock, so common in data from developing countries, and for simultaneity bias because of the endogeneity of factor inputs or because managers have some knowledge about the noise in the production function. The author then estimated the effect of various trade and market-structure variables on the level of TFP, as well as on the deviation of firm TFP from the efficiency frontier. The results are not very sensitive to the different measures of TFP and show that trade openness has a significant positive effect on firm productivity through: outward orientation from export promotion; import liberalization; and more direct foreign investment. By splitting the sample into protected and unprotected sectors, the author showed lower productivity in protected sectors. The results are clear. Trade liberalization in Morocco improved productivity in manufacturing firms, so they could exploit their comparative advantage and compete better with foreign firms.

Suggested Citation

  • Haddad, Mona, 1993. "How trade liberalization affected productivity in Morocco," Policy Research Working Paper Series 1096, The World Bank.
  • Handle: RePEc:wbk:wbrwps:1096
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. James R. Tybout, 2000. "Manufacturing Firms in Developing Countries: How Well Do They Do, and Why?," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 11-44, March.
    2. Mats GRANÉR & Anders ISAKSSON, 2009. "Firm Efficiency And The Destination Of Exports: Evidence From Kenyan Plant-Level Data," The Developing Economies, Institute of Developing Economies, vol. 47(3), pages 279-306.
    3. Karl Lundvall & George Battese, 2000. "Firm size, age and efficiency: Evidence from Kenyan manufacturing firms," Journal of Development Studies, Taylor & Francis Journals, vol. 36(3), pages 146-163.
    4. Chin Hee Hahn, 2004. "Exporting and Performance of Plants: Evidence from Korean Manufacturing," NBER Working Papers 10208, National Bureau of Economic Research, Inc.
    5. Wong, Sara A., 2009. "Productivity and trade openness in Ecuador's manufacturing industries," Journal of Business Research, Elsevier, vol. 62(9), pages 868-875, September.
    6. Sofronis K. Clerides & Saul Lach & James R. Tybout, 1998. "Is Learning by Exporting Important? Micro-Dynamic Evidence from Colombia, Mexico, and Morocco," The Quarterly Journal of Economics, Oxford University Press, vol. 113(3), pages 903-947.
    7. Deb Kusum Das, 2007. "Trade Liberalization and Industrial Productivity: An Assessment of Developing Country Experiences," Working Papers id:1009, eSocialSciences.
    8. Ibrahim Saif, 2001. "Export-Led versus Import Substitution Industries: The Food Industry in Jordan," Working Papers 0128, Economic Research Forum, revised 09 2001.
    9. Arne Bigsten & Paul Collier & Stefan Dercon & Marcel Fafchamps & Bernard Gauthier & Jan Willem Gunning & Abena Oduro & Remco Oostendorp & Catherine Pattillo & Måns Soderbom & Francis Teal & Albert Zeu, 2004. "Do African Manufacturing Firms Learn from Exporting?," Journal of Development Studies, Taylor & Francis Journals, vol. 40(3), pages 115-141.
    10. Ahmed, Qazi Masood & Hyder, Kalim, 2007. "Determinants of Total Factor Productivity in Pakistan," MPRA Paper 16253, University Library of Munich, Germany, revised Jun 2007.
    11. Patricia Augier & Michael Gasiorek & Gonzalo Varela, 2007. "Determinants of Productivity in Morocco - The Role of Trade?," CARIS Working Papers 02, Centre for the Analysis of Regional Integration at Sussex, University of Sussex.
    12. Ramli, Noor Asiah & Munisamy, Susila, 2015. "Eco-efficiency in greenhouse emissions among manufacturing industries: A range adjusted measure," Economic Modelling, Elsevier, vol. 47(C), pages 219-227.
    13. Orefi Abu & Johann Kirsten, 2009. "Profit efficiency of small- and medium-scale maize milling enterprises in South Africa," Development Southern Africa, Taylor & Francis Journals, vol. 26(3), pages 353-368.
    14. Aw, B. -Y. & Hwang, A. R., 1995. "Productivity and the export market: A firm-level analysis," Journal of Development Economics, Elsevier, vol. 47(2), pages 313-332, August.
    15. 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.
    16. Bee Yan Aw & Sukkyun Chung & Mark J. Roberts, 1998. "Productivity and the Decision to Export: Micro Evidence from Taiwan and South Korea," NBER Working Papers 6558, National Bureau of Economic Research, Inc.
    17. Jin-Tan Liu & Meng-Wen Tsou & James Hammitt, 1999. "Export activity and productivity: Evidence from the Taiwan electronics industry," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 135(4), pages 675-691, December.

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