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Trade Liberalization, Exit, and Productivity Improvements: Evidence from Chilean Plants (2002)
| Venue: | Review of Economic Studies |
| Citations: | 555 - 16 self |
BibTeX
@ARTICLE{Pavcnik02tradeliberalization,,
author = {Nina Pavcnik},
title = {Trade Liberalization, Exit, and Productivity Improvements: Evidence from Chilean Plants},
journal = {Review of Economic Studies},
year = {2002},
pages = {245--276}
}
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Abstract
This paper empirically investigates the effects of liberalized trade on plant productivity in the case of Chile. Chile presents an interesting setting to study this relationship since it underwent a massive trade liberalization that significantly exposed its plants to competition from abroad during the late 1970s and early 1980s. Methodologically, I approach this question in two steps. In the first step, I estimate a production function to obtain a measure of plant productivity. I estimate the production function semiparametrically to correct for the presence of selection and simultaneity biases in the estimates of the input coefficients required to construct a productivity measure. I explicitly incorporate plant exit in the estimation to correct for the selection problem induced by liquidated plants. These methodological aspects are important in obtaining a reliable plant-level productivity measure based on consistent estimates of the input coefficients. In the second step, I identify the impact of trade on plants’ productivity in a regression framework allowing variation in productivity over time and across tradedand nontraded-goods sectors. Using plant-level panel data on Chilean manufacturers, I find evidence of within plant productivity improvements that can be attributed to a liberalized trade for the plants in the import-competing sector. In many cases, aggregate productivity improvements stem from the reshuffling of resources and output from less to more efficient producers.
Keyphrases
chilean plant productivity improvement trade liberalization plant productivity production function liberalized trade input coefficient selection problem reliable plant-level productivity measure late 1970s tradedand nontraded-goods sector aggregate productivity improvement many case plant productivity improvement productivity measure interesting setting plant-level panel data efficient producer import-competing sector simultaneity bias second step consistent estimate massive trade liberalization chilean manufacturer regression framework first step liquidated plant methodological aspect plant exit
