TY - JOUR
T1 - Trade Liberalization, Market Share Reallocation, and Aggregate Productivity
T2 - The Case of the Indonesian Manufacturing Industry
AU - Hayakawa, Kazunobu
AU - Matsuura, Toshiyuki
N1 - Funding Information:
We would like to thank Sadayuki Takii, Chin Hee Hahn, Shujiro Urata, and other seminar participants for their helpful comments. We also thank Siwage Dharma Negara and Felix Wisnu Handoyo for giving us the data on minimum wages in Indonesia. All remaining errors are ours. We appreciate the financial aid from the Japan Society for the Promotion of Science, KAKENHI Grant Numbers JP26705002 (to Hayakawa), JP16H02018 (to Matsuura), and JP26285058 (to Matsuura and Hayakawa). * Corresponding author: Toshiyuki Matsuura, Keio Economic Observatory, Keio University, 2-15-45 Mita, Minato-ku, Tokyo 108-8345, Japan. Email: matsuura@sanken.keio.ac.jp
Publisher Copyright:
© 2017 Institute of Developing Economies
PY - 2017/9
Y1 - 2017/9
N2 - We investigate how trade liberalization affects aggregate productivity growth, focusing on market reallocation as well as within-firm productivity improvement. To this end, using Indonesian plant-level data from 1993 to 2005, we estimate the plant-level impact of trade liberalization focusing on productivity, output, and the probability to exit. Then, using the simple dynamic simulation method, we calculate the likely impact if tariff rates remain constant in the initial period. Comparing the actual and counterfactual scenarios, our results show that although within-plant productivity improvement through tariff reduction has a sizable impact on aggregate productivity growth, the contribution of market share reallocation is less significant.
AB - We investigate how trade liberalization affects aggregate productivity growth, focusing on market reallocation as well as within-firm productivity improvement. To this end, using Indonesian plant-level data from 1993 to 2005, we estimate the plant-level impact of trade liberalization focusing on productivity, output, and the probability to exit. Then, using the simple dynamic simulation method, we calculate the likely impact if tariff rates remain constant in the initial period. Comparing the actual and counterfactual scenarios, our results show that although within-plant productivity improvement through tariff reduction has a sizable impact on aggregate productivity growth, the contribution of market share reallocation is less significant.
KW - Aggregate productivity growth
KW - JEL classification: F14, L2
KW - Reallocation effect
KW - Within-plant productivity improvement
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U2 - 10.1111/deve.12138
DO - 10.1111/deve.12138
M3 - Article
AN - SCOPUS:85028521945
SN - 0012-1533
VL - 55
SP - 230
EP - 249
JO - Developing Economies
JF - Developing Economies
IS - 3
ER -