Reassessing the Productivity Gains from Trade Liberalization
IMF Working Papers, March 23, 2016
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Bibliographic details
- Authors: JaeBin Ahn, Era Dabla-Norris, Romain A Duval, Bingjie Hu, Lamin Njie
- Published: March 23, 2016
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475546774.001
Research scope and data
- Builds a new, unique database of effective tariff rates at the country-industry level for a broad range of countries over the past two decades.
- Explores both:
- the direct effect of liberalization in the sector considered, and
- the indirect impact in downstream industries via input linkages.
Main empirical findings
- The indirect input market channel plays a dominant role in fostering productivity gains.
- A 1 percentage point decline in input tariffs is estimated to increase total factor productivity by about 2 percent in the sector considered.
- For advanced economies, the implied potential productivity gains from fully eliminating remaining tariffs are estimated at around 1 percent, on average.
- These estimates do not factor in the presumably larger gains from removing existing non-tariff barriers.
- Strong evidence of complementarities between trade and FDI liberalization in boosting productivity.
Policy implications and recommendations
- A broad liberalization agenda that cuts across different areas is warranted, given complementarities between trade and FDI liberalization.
- Addressing input tariffs can yield sizable productivity improvements through downstream linkages.
- Further gains could be realized by tackling non-tariff barriers alongside tariff liberalization.
Keywords and thematic coverage
- Balance of payments, Foreign direct investment, International trade, Production, Productivity, Tariffs, Taxes, Total factor productivity, Trade liberalization
- Additional keywords: complementarity regression, FDI, fiscal affair, Global, Growth, input tariff, Inputs, Liberalization, output tariff, Productivity, Reforms, tariff data, tariff liberalization, tariff rate, WP
Reassessing the Productivity Gains from Trade Liberalization — By JaeBin Ahn, Era Dabla-Norris, Romain A Duval, Bingjie Hu, Lamin Njie (March 23, 2016), IMF Working Papers 2016, 077.