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Trade Liberalization, Intermediate Inputs, and Productivity: Evidence from Indonesia

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Author Info
Mary Amiti
Jozef Konings

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Abstract

This paper estimates the productivity gains from reducing tariffs on final goods and from reducing tariffs on intermediate inputs. Lower output tariffs can increase productivity by inducing tougher import competition, whereas cheaper imported inputs can raise productivity via learning, variety, and quality effects. We use Indonesian manufacturing census data from 1991 to 2001, which include plant-level information on imported inputs. The results show that a 10 percentage point fall in input tariffs leads to a productivity gain of 12 percent for firms that import their inputs, at least twice as high as any gains from reducing output tariffs. (JEL F12, F13, L16, O14, O19, O24)

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 97 (2007)
Issue (Month): 5 (December)
Pages: 1611-1638
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Handle: RePEc:aea:aecrev:v:97:y:2007:i:5:p:1611-1638

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  2. James R. Tybout, 2000. "Manufacturing Firms in Developing Countries: How Well Do They Do, and Why?," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 11-44, March. [Downloadable!] (restricted)
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  9. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," NBER Working Papers 3577, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  13. John Shea, 1996. "Instrument Relevance in Multivariate Linear Models: A Simple Measure," NBER Technical Working Papers 0193, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  16. Noel Gaston & Daniel Trefler, 1997. "The Labour Market Consequences of the Canada-U.S. Free Trade Agreement," Canadian Journal of Economics, Canadian Economics Association, vol. 30(1), pages 18-41, February. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Long, Ngo Van & Raff, Horst & Stähler, Frank, 2007. "The Effects of Trade Liberalization on Productivity and Welfare: The Role of Firm Heterogeneity, R&D and Market Structure," Economics working papers 2007,20, Christian-Albrechts-University of Kiel, Department of Economics. [Downloadable!]
  2. Patrick Paul Walsh & Peter McGoldrick, 2005. "Estimating Productivity Dynamics During Institutional Change: An Application To Chinese State Owned Enterprises 1980-1994," Trinity Economics Papers 2000514, Trinity College Dublin, Department of Economics. [Downloadable!]
    Other versions:
  3. Juliette Milgram & Marion Dovis, 2008. "Trade,Tariffs and Total Factor Productivity: The Case of Spanish Firms," Working Papers. Serie EC 2008-06, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
  4. Marialuz Moreno Badia & Veerle Slootmaekers, 2008. "The Missing Link Between Financial Constraints and Productivity," LICOS Discussion Papers 20808, LICOS - Centre for Institutions and Economic Performance, K.U.Leuven. [Downloadable!]
  5. Mary Amiti & John Romalis, 2007. "Will the Doha Round Lead to Preference Erosion?," NBER Working Papers 12971, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. Filip Abraham & Jozef Konings & Stijn Vanormelingen, 2006. "Price and wage setting in an integrating Europe : firm level evidence," Research series 200610-5, National Bank of Belgium. [Downloadable!]
  7. Jozef Konings & Hylke Vandenbussche, 2007. "Antidumping Protection and Productivity of Domestic Firms: A firm level analysis," LICOS Discussion Papers 19607, LICOS - Centre for Institutions and Economic Performance, K.U.Leuven. [Downloadable!]
    Other versions:
  8. Marian Rizov & Patrick Paul Walsh, 2005. "Linking Productivity to Trade in the Structural Estimation of Production within UK Manufacturing Industries," The Institute for International Integration Studies Discussion Paper Series iiisdp98, IIIS. [Downloadable!]
  9. Jože P. Damijan & Črt Kostevc, 2006. "Learning-by-Exporting: Continuous Productivity Improvements or Capacity Utilization Effects? Evidence from Slovenian Firms," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 142(3), pages 599-614, October. [Downloadable!] (restricted)
  10. Andreas Kanther & Francisco José Sarabia Sánchez & José Francisco Parra Azor, 2008. "La influencia de la cultura sobre la búsqueda de información. El caso de la vivienda para 'turismo residencial' en la Costa Blanca," Working Papers. Serie EC 2008-03, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
  11. Martin Falk, . "Effects of Foreign Ownership on Innovation Activities - Empirical Evidence for 12 European Countries," FIW Research Reports series 20, FIW. [Downloadable!]
  12. repec:tcd:wpaper:tep14 is not listed on IDEAS
  13. Mauro Pisu, 2008. "Job creation, job destruction and firms’ international trade involvement," Research series 200803-17, National Bank of Belgium. [Downloadable!]
  14. Hiroyuki Kasahara & Beverly Lapham, 2008. "Productivity and the Decision to Import and Export: Theory and Evidence," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  15. Facundo Albornoz & Paolo Vanin, 2007. "Trade Policy and Industrial Structure," Discussion Papers 05-12R, Department of Economics, University of Birmingham. [Downloadable!]
  16. María del Carmen Boado Penas & Carlos Vidal- Meliá, 2008. "El balance actuarial como indicador de la solvencia del sistema de reparto," Working Papers. Serie EC 2008-02, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
  17. N. Bayerl & Oliver Fritz & Robert Hierlaender & G. Streicher, . "Exports, Services and Value Added - A National, International and Regional Analysis for Austria," FIW Research Reports series 8, FIW. [Downloadable!]
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