Working Paper: CEPR ID: DP5104
Authors: Mary Amiti; Jozef Konings
Abstract: This paper estimates the effects of trade liberalization on plant productivity. In contrast to previous studies, we distinguish between productivity gains arising from lower tariffs on final goods relative to those on intermediate inputs. Lower output tariffs can produce productivity gains by inducing tougher import competition whereas cheaper imported inputs can raise productivity via learning, variety or quality effects. We use Indonesian manufacturing census data from 1991 to 2001, which includes plant level information on imported inputs. The results show that the largest gains arise from reducing input tariffs. A 10 percentage point fall in output tariffs increases productivity by about 1%, whereas an equivalent fall in input tariffs leads to a 3% productivity gain for all firms and an 11% productivity gain for importing firms.
Keywords: inputs; productivity; tariffs
JEL Codes: F10; F12; F13; F14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| output tariffs (F19) | productivity (O49) |
| input tariffs (F14) | productivity (O49) |
| input tariffs (F14) | productivity (importing firms) (F23) |
| trade liberalization (input tariffs reduction) (F13) | productivity (O49) |
| input tariffs + importing firms (F14) | productivity (O49) |
| omitted variable bias (input tariffs) (F14) | productivity gains (output tariffs) (O49) |