Trade Liberalization, Intermediate Inputs, and Productivity Evidence from Indonesia

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. Lower output tariffs can produce productivity gains b...

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Bibliographic Details
Main Author: Amiti, Mary
Other Authors: Konings, Jozef
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2005
Series:IMF Working Papers
Subjects:
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
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100 1 |a Amiti, Mary 
245 0 0 |a Trade Liberalization, Intermediate Inputs, and Productivity  |b Evidence from Indonesia  |c Mary Amiti, Jozef Konings 
260 |a Washington, D.C.  |b International Monetary Fund  |c 2005 
300 |a 34 pages 
651 4 |a Indonesia 
653 |a Tariffs 
653 |a Tariff 
653 |a International Trade Organizations 
653 |a Public finance & taxation 
653 |a Productivity 
653 |a Trade Policy 
653 |a Cost 
653 |a Capital and Total Factor Productivity 
653 |a Production 
653 |a Industrial productivity 
653 |a Skills 
653 |a Trade: General 
653 |a Exports and Imports 
653 |a International economics 
653 |a Total factor productivity 
653 |a Labor Productivity 
653 |a Macroeconomics: Production 
653 |a Macroeconomics 
653 |a Occupational Choice 
653 |a Capacity 
653 |a Labor productivity 
653 |a Taxation 
653 |a Human Capital 
653 |a Imports 
653 |a Production and Operations Management 
700 1 |a Konings, Jozef 
041 0 7 |a eng  |2 ISO 639-2 
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490 0 |a IMF Working Papers 
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082 0 |a 330 
520 |a 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. Lower output tariffs can produce productivity gains by inducing tougher import competition whereas cheaper imported inputs can raise productivity via learning, variety, or quality effects. We use Indonesian manufacturing census data from 1991 to 2001, which includes plant-level information on imported inputs. The results show that the largest gains arise from reducing input tariffs. A 10 percentage point fall in output tariffs increases productivity by about 1 percent, whereas an equivalent fall in input tariffs leads to a 3 percent productivity gain for all firms and an 11 percent productivity gain for importing firms