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Trade Liberalisation, Exit, and Output and Employment Adjustments of Australian Manufacturing Establishments

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  • Alfons Palangkaraya
  • Jongsay Yong

Abstract

We use unpublished establishment level data of Australian manufacturing from 1993-94 and 1996-97 censuses to study how trade liberalisation affects productivity. More specifically, we use the variation in the extent of trade liberalisation across four digit ANZSIC manufacturing industries classification to identify the link between trade liberalisation and three outcomes: establishments’ probability of exit, the change in the size of output and the change in employment. There is weak evidence that establishments in industries with greater reductions in effective rate of assistance are more likely to exit. We find strong evidence that they reduce employment. There is no evidence for economies of scale through output expansion. Together these indicate that the documented productivity gains of trade liberalisation may come more from the pro-competitive effects which forces establishments to reduce their slackness rather than from the exit of less efficient establishments.
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Suggested Citation

  • Alfons Palangkaraya & Jongsay Yong, 2011. "Trade Liberalisation, Exit, and Output and Employment Adjustments of Australian Manufacturing Establishments," The World Economy, Wiley Blackwell, vol. 34(1), pages 1-22, January.
    • Handle: RePEc:bla:worlde:v:34:y:2011:i:1:p:1-22
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    References listed on IDEAS

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    Cited by:

    1. Afşin Şahin & Aysit Tansel & M. Hakan Berument, 2015. "Output–Employment Relationship Across Sectors: A Long- Versus Short-Run Perspective," Bulletin of Economic Research, Wiley Blackwell, vol. 67(3), pages 265-288, July.
    2. Afşin Şahin & Aysit Tansel & M. Hakan Berument, 2015. "Output–Employment Relationship Across Sectors: A Long- Versus Short-Run Perspective," Bulletin of Economic Research, Wiley Blackwell, vol. 67(3), pages 265-288, July.
    3. Alfons Palangkaraya, 2013. "On the Relationship between Innovation and Export: The Case of Australian SMEs," Melbourne Institute Working Paper Series wp2013n04, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    4. Alfons PALANGKARAYA, 2012. "The Link between Innovation and Export: Evidence from Australia 's Small and Medium Enterprises," Working Papers DP-2012-08, Economic Research Institute for ASEAN and East Asia (ERIA).
    5. Turnbull, Christopher & Sun, Sizhong & Anwar, Sajid, 2016. "Trade liberalisation, inward FDI and productivity within Australia’s manufacturing sector," Economic Analysis and Policy, Elsevier, vol. 50(C), pages 41-51.

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    JEL classification:

    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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