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

American Economic Review · 2007 · Vol. 97(5) · pp. 1611–1638
Mary AmitiJozef Konings

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)

Global trade and economicsInternational Business and FDIGlobal Trade and CompetitivenessProductivityEconomicsFree tradeCompetition (biology)International economicsPoint (geometry)Agricultural economicsInternational tradeMacroeconomics
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References
Globalization and the Inequality of Nations
The Quarterly Journal of Economics · 1995 · 2,295 citations
The American Economic Review
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