Trade Liberalization, Intermediate Inputs, and Productivity: Evidence from Indonesia
- (pp. 1611-1638)
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)Citation
Amiti, Mary, and Jozef Konings. 2007. "Trade Liberalization, Intermediate Inputs, and Productivity: Evidence from Indonesia." American Economic Review, 97 (5): 1611-1638. DOI: 10.1257/aer.97.5.1611Additional Materials
JEL Classification
- F12 Models of Trade with Imperfect Competition and Scale Economies
- F13 Trade Policy; International Trade Organizations
- L16 Industrial Organization and Macroeconomic Industrial Structure; Industrial Price Indices
- O14 Industrialization; Manufacturing and Service Industries; Choice of Technology
- O19 International Linkages to Development; Role of International Organizations
- O24 Development Planning and Policy: Trade Policy; Factor Movement; Foreign Exchange Policy