Trade Policy, Trade Volumes and Plant-Level Productivity in Colombian Manufacturing Industries

33 Pages Posted: 5 Dec 2006

See all articles by Ana M. Fernandes

Ana M. Fernandes

World Bank - International Trade Division; World Bank

Abstract

This paper explores a period of substantial variation in trade policy across industries in Colombia (1977-1991) to examine whether increased exposure to foreign competition generates productivity gains for manufacturing plants. Using an estimation methodology that addresses the shortcomings of previous studies, we find a strong positive impact of tariff liberalization on plant productivity, even after controlling for plant and industry heterogeneity, real exchange rates, and cyclical effects. The impact of liberalization is stronger for larger plants and plants in less competitive industries. Our findings are not driven by the endogeneity of protection. Similar results are obtained when using effective rates of protection and import penetration ratios as measures of protection. Productivity gains under trade liberalization are linked to increases in intermediate inputs' imports, skill intensity, and machinery investments, and to output reallocations from less to more productive plants.

Keywords: Simultaneity and Production Functions, Trade Policy, Productivity, Colombian Manufacturing, Endogeneity of Protection

JEL Classification: F13, D24, C14, O54

Suggested Citation

Fernandes, Ana Margarida, Trade Policy, Trade Volumes and Plant-Level Productivity in Colombian Manufacturing Industries. Journal of International Economics, 2007, Available at SSRN: https://ssrn.com/abstract=947893

Ana Margarida Fernandes (Contact Author)

World Bank - International Trade Division

1818 H Street, N.W.
Washington, DC 20433
United States

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

HOME PAGE: http://econ.worldbank.org/staff/afernandes

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