Trade Liberalization, Intermediate Inputs, and Productivity: Evidence from Indonesia (EPub)

Trade Liberalization, Intermediate Inputs, and Productivity: Evidence from Indonesia (EPub)

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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 lower tariffs 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 percent, whereas an equivalent fall in input tariffs leads to a 3 percent productivity gain for all firms and an 11 percent productivity gain for importing firms.Indonesia became a WTO member on January 1, 1995, at which time it made a commitment to reduce all bound tariffs to 40 ... There were 73 five-digit ISIC codes that included at least one excluded HS code, and only 9 ISIC codes which anbsp;...


Title:Trade Liberalization, Intermediate Inputs, and Productivity: Evidence from Indonesia (EPub)
Author: Mary Amiti, Jozef Konings
Publisher:International Monetary Fund - 2005-07-01
ISBN-13:

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