{
  "title": "Trade Liberalization, Intermediate Inputs, and Productivity: Evidence from Indonesia",
  "publication": "IMF Working Papers, July 1, 2005",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/trade-liberalization-intermediate-inputs-and-productivity-evidence-from-indonesia-18377",
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  "summary": "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.",
  "sections": [
    {
      "heading": "Summary",
      "content": "- This paper estimates the effects of trade liberalization on plant productivity, distinguishing productivity gains from lower tariffs on final goods (output tariffs) versus lower tariffs on intermediate inputs (input tariffs).\n- Lower output tariffs can produce productivity gains by inducing tougher import competition.\n- Cheaper imported inputs can raise productivity via learning, variety, or quality effects.\n- Data: Indonesian manufacturing census data from 1991 to 2001, which includes plant-level information on imported inputs.\n- Main quantitative results:\n  - A 10 percentage point fall in output tariffs increases productivity by about 1 percent.\n  - A 10 percentage point fall in input tariffs leads to a 3 percent productivity gain for all firms.\n  - A 10 percentage point fall in input tariffs leads to an 11 percent productivity gain for importing firms."
    },
    {
      "heading": "Methodology and Data",
      "content": "- Data source: Indonesian manufacturing census data, 1991 to 2001, with plant-level information on imported inputs.\n- Comparative identification: Separates effects of reductions in output tariffs from reductions in input tariffs to isolate channels (import competition vs. input-driven learning/variety/quality)."
    },
    {
      "heading": "Key Findings",
      "content": "- Largest productivity gains arise from reducing input tariffs rather than output tariffs.\n- Quantified effects:\n  - Output tariff reduction: 10 percentage point → ~1 percent productivity increase.\n  - Input tariff reduction: 10 percentage point → 3 percent productivity increase (all firms).\n  - Input tariff reduction: 10 percentage point → 11 percent productivity increase (importing firms)."
    },
    {
      "heading": "Subjects and Keywords",
      "content": "- Subject: Imports, Labor productivity, Productivity, Tariffs, Total factor productivity\n- Keywords: goods tariff, input tariff, output tariff, productivity gain, WP\n\n---\n\n Content in this bundle\n\n- wp05146 — Input Price Indices in Indonesia, 1991–2001\n  - wp05146 — Input Price Indices in Indonesia, 1991–2001 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp05146 — Input Price Indices in Indonesia, 1991–2001 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/trade-liberalization-intermediate-inputs-and-productivity-evidence-from-indonesia-18377"
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  "bullets": [
    "[Markdown version](/en/publications/wp/issues/2016/12/31/trade-liberalization-intermediate-inputs-and-productivity-evidence-from-indonesia-18377/index.md)",
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    "Authors: Mary Amiti, Jozef G Konings",
    "Published: July 1, 2005",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451861655.001",
    "This paper estimates the effects of trade liberalization on plant productivity, distinguishing productivity gains from lower tariffs on final goods (output tariffs) versus lower tariffs on intermediate inputs (input tariffs).",
    "Lower output tariffs can produce productivity gains by inducing tougher import competition.",
    "Cheaper imported inputs can raise productivity via learning, variety, or quality effects.",
    "Data: Indonesian manufacturing census data from 1991 to 2001, which includes plant-level information on imported inputs.",
    "Main quantitative results:",
    "Data source: Indonesian manufacturing census data, 1991 to 2001, with plant-level information on imported inputs.",
    "Comparative identification: Separates effects of reductions in output tariffs from reductions in input tariffs to isolate channels (import competition vs. input-driven learning/variety/quality).",
    "Largest productivity gains arise from reducing input tariffs rather than output tariffs.",
    "Quantified effects:",
    "Subject: Imports, Labor productivity, Productivity, Tariffs, Total factor productivity",
    "Keywords: goods tariff, input tariff, output tariff, productivity gain, WP",
    "**_wp05146 — Input Price Indices in Indonesia, 1991–2001**"
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