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

By M. Amiti, Jozef Konings. Social Science Research Network, 2005

2,240 citations recorded by the source corpus.

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 those 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%, whereas an equivalent fall in input tariffs leads to a 3% productivity gain for all firms and an 11% productivity gain for importing firms.

Subfields: Economics and Econometrics, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/0e132e5c41fff1d7ec1c3a5fe83a010dc06b56e2

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Citations in the corpus

GLOBAL VALUE CHAINS: A SURVEY OF DRIVERS AND MEASURES (2016, neutral): “Amiti and Konings (2007) also use the share of imported inputs to total inputs in some specifications of their study.”
The Wage Effects of Offshoring: Evidence from Danish Matched Worker-Firm Data (2014, neutral): “17 Papers relevant to this point include Hanson and Harrison (1999), Caselli and Coleman (2001), Amiti and Konings (2008), Verhoogen (2008) and Bustos (2011).”
Learning from Trade Through Innovation (2010, neutral): “As can be seen from (5), the increased productivity or lower share of cost of production increase the probability of a firm to invest a higher proportion of expenditures into R&D and hence increase the probability of successful innovations.”
The heterogeneous impact of Brexit: Early indications from the FTSE (2018, background): “…intermediates are more productive than others, e.g. Halpern, Koren, and Szeidl (2015), Altomonte, Aquilante, B´ek´es, and Ottaviano (2013), and Nickerson and Konings (2007), this suggests that Brexit will lower the productivity of aﬀected ﬁrms, an eﬀect that would potentially drive the…”
The Decision to Import Capital Goods in India : Firms’ Financial Factors Matter (2012, neutral): “1 Amiti and Konings (2007) ﬁnd that input-trade liberalization in Indonesia boosts ﬁrm productivity up-to 12 percent, while Khandelwal and Topalova (2010) show that it improved ﬁrm productivity by 4.8 percent in India.”
Trade as an engine of creative destruction: Mexican experience with Chinese competition (2013, background): “Second, we recognize that competition may be felt as strongly in export markets as at home, and hence also evaluate these impacts on a third country market.(2) To our knowledge this has not been done before.”
New Imported Inputs, New Domestic Products (2011, background): “NPcit = ci + t + ( 1 + 2Ift tcg) NIIovcit 1 + "cit, (4)”
Defining firm competitiveness: A multidimensional framework (2020, background): “productivity via learning, variety and quality effects (Amiti and Konings, 2007).”
Input-trade liberalization, export prices and quality upgrading (2015, neutral): “A new and growing literature thus explores the role of quality in explaining these observed patterns (Baldwin and Harrigan 2011, Hallak and Sivadasan -forthcoming-, Crozet, Head and Mayer 2012, Johnson 2012, Verhoogen 2008, Kugler and Verhoogen 2012).”
Trade Liberalization, Quality, and Export Prices (2015, neutral): “Dimensions along which superior performance has been measured include improved total factor productivity (Amiti & Konings, 2007; Kasahara & Rodrigue, 2008; Halpern, Koren, & Szeidl, 2011; Gopinath & Neiman, 2011), expanded product scope (Goldberg et al., 2010), and quality upgrading (Amiti &…”