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Reassessing the Productivity Gains from Trade Liberalization
Author:
Mr. JaeBin Ahn
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,
Ms. Era Dabla-Norris
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Mr. Romain A Duval
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https://orcid.org/0000-0002-2775-7172
,
Bingjie Hu
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, and
Lamin Njie
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Series:
IMF Working Papers
Volume/Issue:
Volume 2016: Issue 077
Language:
English
Publication Date:
23 Mar 2016
DOI:
https://doi.org/10.5089/9781475546774.001
ISBN:
9781475546774
ISSN:
1018-5941
Pages:
31
Keywords:
WP; input tariff; output tariff; tariff data; Trade; Productivity; Tariffs; Inputs; Liberalization; FDI; Reforms; Growth; tariff rate; complementarity regression; tariff liberalization; Total factor productivity; Foreign direct investment; Trade liberalization; Global; research department; fiscal affair; productivity gains from trade liberalization
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper reassesses the impact of trade liberalization on productivity. We build a new, unique database of effective tariff rates at the country-industry level for a broad range of countries over the past two decades. We then explore both the direct effect of liberalization in the sector considered, as well as its indirect impact in downstream industries via input linkages. Our findings point to a dominant role of the indirect input market channel in fostering productivity gains. A 1 percentage point decline in input tariffs is estimated to increase total factor productivity by about 2 percent in the sector considered. For advanced economies, the implied potential productivity gains from fully eliminating remaining tariffs are estimated at around 1 percent, on average, which do not factor in the presumably larger gains from removing existing non-tariff barriers. Finally, we find strong evidence of complementarities between trade and FDI liberalization in boosting productivity. This calls for a broad liberalization agenda that cuts across different areas.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund