Trade Openness,Structural Change and Total Factor Productivity

The impact of trade openness on growth of total factor productivity (TFP) is investigated. Given the differences in tradability of goods across sectors as well as the ongoing structural change, we examine whether trade openness has had a differential impact on TFP growth of the three main sectors of an economy. While the positive impact of openness on TFP growth for the aggregate economy is confirmed, openness has had no appreciable impact on the growth of TFP in the agricultural and industrial sectors. We find that the positive effect of openness on TFP growth for the economy as a whole was mostly due to the positive relationship between the two variables for the services sector. Further, we conclude that the lack of a general consensus in past studies could be due to their neglect of structural change and temporal factors when analyzing the trade-TFP nexus.     

Trade and market selection: Evidence from manufacturing plants in Colombia

We examine the link between trade liberalization and aggregate productivity, with a focus on improved market selection resulting from a reduction in trade barriers and in the dispersion of these barriers across producers. Our analysis exploits tariff changes across sectors after the Colombian trade reform. An additional advantage of our analysis is that our TFP measure does not include demand and price effects. We find that reduced trade protection makes plant survival depend more closely on productivity. Using a dynamic simulation, we find that enhanced selection increases aggregate productivity substantially. Trade liberalization also increases productivity of incumbent plants and improves the allocation of activity. We find larger effects on allocative efficiency with our TFP measure than with a traditional measure including price effects.     

Testing creative destruction in an opening economy

This paper analyses the relationship between trade liberalization and economic growth using a Schumpeterian framework of technological innovation and applies it to sector‐level South African data. The framework examines direct and indirect effects of trade liberalization on productivity growth. Indirect impacts operate through a differential impact of trade liberalization on firms conditional on their distance from the international technological frontier. Results confirm positive direct impacts of trade liberalization. Results confirm also that the greatest positive impact of trade liberalization will be on sectors that are close to the international technological frontier and that experienced a low level of product market competition before liberalization.     

Market discipline and corporate efficiency: evidence from Bulgaria

In this paper we investigate the impact of an increase in market discipline on total factor productivity (TFP) growth at the level of the firm in Bulgaria during 1991–95, focusing in particular on the effect of trade liberalization, corporatization and rationalization of conglomerates, and hard budget constraints. The data support the predicted relationship between increases in market discipline and subsequent productivity growth. Our results demonstrate the need to distinguish between exporting and non-exporting enterprises in assessing the impact of trade liberalization and the importance of taking into account other relevant policy changes. JEL Classification: F14, D24     

PRODUCTIVITY MATTERS FOR TRADE POLICY: THEORY AND EVIDENCE*

In the growth literature that investigates the effect of trade liberalization on productivity, nearly all studies assume that trade policy is determined independently of productivity, and, hence, it is exogenous. I show, both theoretically and empirically, that this assumption is not valid in general. I find that in Colombia more productive sectors receive more protection and the sectors with higher productivity gains are liberalized less even in the presence of a large unilateral liberalization shock that affects all sectors. Researchers may be underestimating the positive effect of liberalization on productivity when they do not account for the endogeneity bias.     

International trade,technological change and wage inequality in the UK economy

This paper examines the joint impact of international trade and technological change on UK wages across different skill groups. International trade is measured as changes in product prices and technological change as total factor productivity (TFP) growth. We take account of a multi-sector and multi-factor of production economy and use mandated wage methodology in order to create an well-balanced approach in terms of theoretical and empirical cohesion. We use data from the EU KLEMS database and analyse the impact of both product price changes and TFP changes of 11 UK manufacturing sectors on factor rewards of high-, medium- and low-skilled workers. Results show that real wages of skill groups are significantly driven by the sector bias of price change and TFP growth of several sectors of production. Furthermore, we estimate the share of the three different skill groups on added value for each year from 1970 to 2005. The shares indicate structural change in the UK economy. Results show a structural change owing to decreasing shares of low-skilled workers and increasing shares of medium-skilled and high-skilled workers over the years.     

The better you are the stronger it makes you: Evidence on the asymmetric impact of liberalization

This paper shows how trade liberalization can have an asymmetric effect on heterogeneous firms. It develops a neo-Schumpeterian growth model predicting that the impact of liberalization on economic performance is positive “on average”, but more advanced firms benefit more. These predictions are tested using Mexican plant-level data confirming that, under NAFTA, the liberalization spurred productivity growth on average. However, the empirical analysis goes beyond estimating the average effect of liberalization and shows that more advanced firms benefited disproportionately more from the liberalization. Focusing on the mechanisms explaining these results, the paper shows that the results are not just driven by an increase in input usage and investments, but rather by innovative and managerial efforts as they are significantly stronger in those sectors where the scope for innovative activities is larger.     

Trade Policy and Productivity Growth in OECD Manufacturing *

Trade liberalization may promote economic growth in a number of ways, including by accelerating the rate of technological change. Firms that face more intense import competition may be spurred to greater rates of innovation; firms which export may absorb new technologies through their contact with international markets. This paper examines evidence on trade policy and productivity growth for a sample of thirteen OECD countries and including eighteen manufacturing sectors, using data primarily from the 1980s. Within individual sectors, there are strong productivity convergence effects within the OECD. After controlling for convergence, we find a positive association between high rates of productivity growth and low tariffs, and between high productivity growth and strong export performance. We found no particular association between high productivity growth and import penetration. The results are consistent with the possibility of positive linkages between trade liberalization and accelerated productivity growth. [F1, O4]     

New Evidence from Brazil on Trade Liberalization and Productivity Growth*

This article presents evidence on the positive effect of international trade on productivity growth using industrial level data preceding and following Brazil's trade liberalization in 1988–90. Our data reveal large and widespread productivity improvement across industries after barriers to trade were drastically reduced. Econometric results confirm the association between trade liberalization and productivity growth and show that the impact was indeed substantial: The observed tariff reduction in the period brought a 6% estimated increase in total factor productivity growth rate and a similar impact on labor productivity.     

The Canadian productivity stagnation, 2002–2014

Total factor productivity (TFP) growth in Canada between 2002 and 2014 has been only 0.16% per year. This figure is substantially smaller than that of the United States, or that of Canada in the past. We perform multiple counterfactual exercises to show that this small TFP growth cannot be accounted for by several compositional effects or mismeasurements of factors of production. We identify two key sectors (mostly Mining and to a lesser extent Manufacturing) that drive all of the TFP growth difference with the United States. Despite the lack of TFP growth, Canada has experienced sustained income growth due to a prolonged period of appreciation of the terms of trade (while US terms of trade have deteriorated), making real income in the two countries grow at similar rates.     

Trade Liberalization and Wage Inequality: Evidence from India

We evaluate empirically the impact of the dramatic 1991 trade liberalization in India on the industry wage structure. The empirical strategy uses variation in industry wage premiums and trade policy across industries and over time. In contrast to most earlier studies on developing countries, we find a strong, negative, and robust relationship between changes in trade policy and changes in industry wage premiums over time. The results are consistent with liberalization‐induced productivity increases at the firm level, which get passed on to industry wages. We also find that trade liberalization has led to decreased wage inequality between skilled and unskilled workers in India. This is consistent with the magnitude of tariff reductions being relatively larger in sectors with a higher proportion of unskilled workers.     

Can total factor productivity explain value added growth in services?

This paper examines the factors responsible for generating the services led growth witnessed in the Indian economy during 1980–2005. A sectoral growth accounting exercise shows that total factor productivity (TFP) growth was the fastest for services; moreover this TFP increase was significant in accounting for service sector value added growth. A growth model with agriculture, industry and services as three principal sectors is calibrated to Indian data using sectoral TFP growth rates. The baseline model performs well in accounting for the evolution of value added shares and their growth rates, but is unable to capture sectoral employment share trends. The performance of the model with respect to value added shares improves when the post 1991 increase in service sector TFP growth following the inception of market-based liberalization reforms is accounted for. A modified version of the model with public capital can better track trends in sectoral employment shares.     

Why is TFP growth sectorally concentrated?

Research shows that total factor productivity (TFP) growth is weak in European countries. This is inter alia attributed to the fact that substantial TFP growth is limited to a few industries. Because TFP growth is typically understood as technological progress, it is concluded that technology diffusion between sectors in Europe is hampered. We use EU KLEMS data sets to decompose sectoral TFP for nine European countries by means of a Malmquist approach in order to identify potential sources besides technical progress. Applying Harberger diagrams, we describe the sectoral distribution of TFP growth, efficiency gains and losses, economies of scale and technological progress. The analysis reveals that technological progress is quite evenly distributed across sectors in most European countries. The wide scattering of TFP growth is explained by deviating efficiency developments and the unused economies of scale. We conclude that the technology transfer between sectors in most European countries seems to work. Therefore, Europe in general does not need a new technology policy, but a further integration of the markets and a reduction of national market entry barriers. This requires further unification of pan-European standards in fields like trade and crafts codes or consumer protection policies.     

UNDERSTANDING THE WORLD WOOL MARKET: TRADE,PRODUCTIVITY AND GROWERS’ INCOMES*

Applying recent estimates of total factor productivity (TFP) growth on Australian sheep farms, we analyse the long‐run effects of TFP growth on the world wool market using a detailed model of the world wool market that treats raw wool, wool textiles and wool garments as heterogeneous commodities. The model divides the world wool market into nine regions and eight major industrial sectors capturing the extreme nature of the multistage production system through which wool passes. We find that regional sheep producer's welfare responds by between ‐0.9 per cent and 0.7 per cent assuming conservative TFP growth over the period 1995/96–2003/04. Sensitivity analysis shows the welfare effects to be robust with respect to all model parameters, but sensitive to the size of the TFP growth and the degree of TFP spill‐over. Our realistic representation of the multistage nature of the wool production system shows that wool inputs steadily decline in importance in moving from early‐ to late‐stage processing. This production structure indicates that the productivity of sheep farmers has little effect on the prices of and demand for wool garments. In contrast, trade in wool inputs is very responsive to the productivity of sheep farmers.     

何去何从:贸易保护还是开放竞争?——来自微观企业创新的证据

文章基于熊彼特效应和逃离竞争效应假说,结合中国转轨时期的经济制度背景,利用2001?2008年制造业关税数据和沪深A股上市公司专利数据,研究了中国加入WTO后,关税削减所导致的进口竞争对企业创新的影响.研究发现,关税削减后,企业的发明专利申请数量显著增加,而专利申请总数和非发明专利申请数量却没有受到显著影响,表明进口竞争激励企业进行了高质量的发明创新.进口竞争的激励效应对于易受竞争影响和全要素生产率高的企业更加显著.文章认为,应以开放的心态迎接贸易自由化和进口竞争,引导企业将进口竞争转化为创新动力,推动企业创新向高质量迈进,形成国际竞争新优势.     

Trade liberalization and Firms’ export performance in China: Theory and evidence

The focus of the literature surrounding trade liberalization has recently shifted from trade liberalization in imported final goods to studying the effects of trade liberalization in imported intermediate inputs. This emphasis fits very well the trade liberalization experience of China following its accession to the WTO in 2001. In this paper, we build a multi-sector heterogenous-firm model with trade in both intermediate goods and final goods, and we ask: How do final-goods producers respond to trade liberalization in imported inputs? Do they respond differently across sectors? How do firms respond differently to trade liberalization in imported-outputs instead? We separate the total effect of trade liberalization into those caused by inter-sectoral resource allocation (IRA) and by within-sector selection of firms according to productivity (which we call Melitz selection effect). It is the IRA effect that gives rise to differential impacts of trade liberalization in different sectors. These impacts include changes in the probability of entry into the export market, the fraction of firms that export and the share of export revenue. To test our hypotheses, we carry out both quantitative analysis and empirical analysis by using Chinese firm-level data. The results are consistent with our theoretical predictions.     

Does international openness affect the productivity of local firms?

This paper examines how international openness can change firm productivity in south‐eastern Europe (SEE), a crucial question for middle‐income countries. Using firm‐level data for six transition economies over the 1995–2002 period, we identify whether foreign ownership and propensity to trade with more advanced countries can bring about higher learning effects. We find that: (i) foreign ownership has helped restructure and enhance the productivity of local firms in four out of six countries; (ii) exporting to advanced markets has a larger impact on productivity growth in four countries, especially when the firm's absorptive capacity is taken into account; (iii) in contrast, exporting to the less competitive markets of the former Yugoslavia seems to negatively affect productivity growth in three countries; and (iv) learning effects from importing are similar to those from exporting. Our results suggest that trade liberalization is not uniformly beneficial. Regional composition of trade flows and absorptive capacity of local firms matter. Thus, trade liberalization within the SEE region may not provide a substitute for a general trade liberalization which includes access to the more competitive markets of countries belonging to the Organization for Economic Co‐operation and Development.     

THE IMPACT OF DOMESTIC AND FOREIGN COMPETITION ON SECTORAL GROWTH: A CROSS‐COUNTRY ANALYSIS

This paper examines the impact of competition on the total factor productivity (TFP) of 21 manufacturing sectors in eighteen OECD countries over the period of time 1990–2006. We assume that the source of TFP growth can be either domestic or foreign innovation or technology transfer from the technological frontier. Trade openness, R&D, and human capital can have two effects: a direct effect on TFP (e.g., through innovation) and an indirect effect depending on the productivity gap between a given country and the technological frontier. We find that tougher domestic competition is always associated with higher sectoral productivity. Both import and export penetrations are positively associated with an increase of TFP. However, the channels through which higher TFP is materialized are different: export penetration works through level effect, while import penetration acts mainly when conditional on the level of technological development. The economical magnitude of the effect is not trivial.     

Services liberalization and productivity of manufacturing firms

Employing a unique database of Ukrainian firms in 2001–07, we use the external push for liberalization in the services sector as a source of exogenous variation to identify the effect of services liberalization on total factor productivity (TFP) of manufacturing firms. The results indicate that a standard deviation increase in services liberalization within a firm is associated with a 9.2 percent increase in TFP. The effect is stronger for firms with high productivity, bringing about a reallocation of resources within an industry. Industry‐level results show that the effect of reallocation on industry productivity is almost as strong as the within‐firm effect. The dynamic interaction of services liberalization and TFP through the investment channel reinforces the effect. The effect is robust to different estimation methods and to different sub‐samples of the data. In particular, it is more pronounced for domestic and small firms.     

R&D Policies and Endogenous Growth: A Dynamic General Equilibrium Analysis of the Case for Canada*

This paper utilizes a general equilibrium R&D model of endogenous growth via increasing capital variety to examine the impact of alternative policies on productivity and economic growth. The model is calibrated using data from the Canadian economy. Findings reveal that direct incentives such as subsidies to R&D activities would have the highest productivity impact on the Canadian economy, that an increase in subsidies to the users of R&D capital (output) would have a positive but smaller impact, and trade liberalization would have minimal effects on productivity growth via its impact on international R&D spillovers.