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     

Global Value Chains: Inter-Industry Linkages,Trade Costs and Policies

Review of Industrial Organization -     

Preference Erosion and Multilateral Trade Liberalization

Because of concern that tariff reductions in Organisation forEconomic Co-operation and Development (OECD) countries willtranslate into worsening export performance for the least developedcountries, the erosion of trade preferences may become a stumblingblock for multilateral trade liberalization. An econometricanalysis of actual preference use shows that preferences areunderused because of administrative burdens—estimatedto be equivalent to an average of 4 percent of the value ofgoods traded. To quantify the maximum scope for preference erosion,the compliance cost estimates are used in a model-based assessmentof the impact of full elimination of OECD tariffs. Taking intoaccount administrative costs eliminates erosion costs in theaggregate and greatly reduces the losses for countries mostaffected by preference erosion.     

Trade reorientation and post-reform productivity growth in Bulgarian enterprises

This paper analyzes the importance of integration into world markets following the collapse of central planning in explaining the productivity growth performance of Bulgarian firms. Using a large panel data set on 1,300 manufacturing firms for 13 quarters, we find that a shift towards sourcing from - and exporting to - OECD markets is a significant factor explaining firm-level total factor productivity growth.     

Eliminating Excessive Tariffs on Exports of Least Developed Countries

Although average OECD tariffs on imports from the least developedcountries are very low; tariffs above 15 percent (peaks) havea disproportional effect on their exports. Products subjectto tariff peaks tend to be heavily concentrated in agricultureand food products and labor-intensive sectors, such as appareland footwear. Although the least developed countries benefitfrom preferential access, preferences tend to be smallest fortariff peak products. A major exception is the European Union,so that the recent European initiative to grant full duty-freeand quota-free access for the least developed countries (theso-called Everything But Arms initiative) will result in onlya small increase in their exports of tariff peak items (lessthan 1 percent of total exports). However, as preferences areless significant in other major OECD countries, a more generalemulation of the European Union initiative would increase theleast developed countries' total exports of peak products byUS$2.5 billion (11 percent of total exports). Although almosthalf of this increase is at the expense of other developingcountry exports, this represents less than 0.05 percent of theirtotal exports. This trade diversion can be avoided by reducingtariff peaks to a uniform 5 percent applied on a nondiscriminatorybasis. However, such a reform would imply no gains for the leastdeveloped countries, suggesting that the globally welfare-superiorpolicy of nondiscriminatory elimination of tariff peaks shouldbe complemented by greater direct assistance to poor countries.     

Agricultural Tariffs or Subsidies: Which Are More Important for Developing Economies?

This article assesses the impact of the world price–depressingeffect of agricultural subsidies and border protection in OECDcountries on developing economies' exports, imports, and welfare.Developing economy exporters are likely to benefit from reductionsin such subsidies and trade barriers, whereas net importersmay lose as world prices rise. A simple partial equilibriummodel of global trade in commodities that benefit from domesticsupport or export subsidies is developed to estimate the relevantelasticities. Simulation results suggest that a 50 percent reductionin border protection will have a much larger positive impacton developing economies' exports and welfare than a 50 percentreduction in agricultural subsidies. Although there is significantheterogeneity across developing economies, the results suggestthat efforts in the Doha Round of negotiations should be directed at substantially reducing border protection.