Liberalization Productivity And Competition

The empirical evidence linking economic reform in developing countries with gains in productivity and efficiency is both limited and inconclusive. Using large firm-level data collected by the Reserve Bank of India, this book examines the impact of reform on productivity and competition for the Indian manufacturing sector in the eighties. Relying on econometric estimates of pre- and post-reform productivity growth, the study finds evidence of significantly higher productivity growth rates after the mid-eighties both at the aggregate and two-digit sector levels. The author seeks corroborating evidence by developing a framework that enables him to simultaneously estimate economies of scale, a measure of optimal labour utilization and the mark-up of price over marginal cost as an indicator of competitiveness. Though he finds evidence of better labour utilization, there is no indication of reduced market power or any significant departure from constant returns to scale in the post-reform period. He concludes that even the limited reforms of the eighties led to productivity gains which were achieved largely through better resource use.

Does competition spur productivity? And if so, how? These have long been regarded as central questions in economics. The extent of competition can be influenced by policy decisions, so understanding how competition impacts productivity and, in turn, living standards is of more than academic importance. To fully answer these questions of whether, and how, an increase in competition impacts productivity, two issues must be addressed. First, the authors define what we mean by an ¿increase in competition.¿ Second, they attempt to understand the mechanisms through which competition impacts productivity. Both issues present substantial challenges, which the authors address. Illustrations. This is a print-on-demand publication; it is not an original.

This paper investigates the extent to which productivity growth is the result of turnover - the process that shifts output from one firm to another as a result of the competitive process. Turnover occurs because some firms gain market share and others lose it. Some turnover is due to entry and exit. The other part arises from growth and decline in incumbent continuing producers. The paper proposes a method for measuring the impact of plant turnover on productivity growth and outlines how this contribution has changed in Canada as a result of substantial trade liberalization in the 1990s.

To what degree are trade liberalization, productivity, and economic growth correlated? Can economic policies designed to encourage competition and curtail industry protection result in large-scale improvements, such as increased innovation and reduced unemployment? After 20 years of economic reform in the Middle East and North Africa (MENA), economic performance is still lagging behind many regions of the world. Even in those countries that are the most advanced in implementing reforms, including Egypt, Jordan, Morocco and Tunisia, industries with low productivity growth and high market power continue to dominate. Moreover, the termination of the Multi-Fiber Agreement and the negotiations concerning further liberalization of trade in agricultural products (under the framework of the World Trade Organization) put these and other countries under pressure of fierce competition from emerging nations. Recent empirical evidence on the impact of reforms in a number of developing countries shows that such persistence of inefficiency and market power is specific to MENA. Showcasing in-depth analyses from Jordan, Morocco, Tunisia, and Turkey (with comparative data from Asia and Latin America), this book focuses on the dynamics of firm entry and exit to help explain the low productivity of the region. The results suggest a number of policy recommendations designed to foster competition, which, in turn, would contribute to innovation, productivity growth, and improved return on capital investments. The book not only reveals important correlations among policy and market factors in MENA, but suggests fruitful areas of research in other developing regions of the world.

Looking at the fascinating Argentinian experience with trade liberalization, this study provides a contribution to improve our understanding of both the political economy and the economic effects of trade policy reform.

To what degree are trade liberalization, productivity, and economic growth correlated? Can economic policies designed to encourage competition and curtail industry protection result in large-scale improvements, such as increased innovation and reduced unemployment? After 20 years of economic reform in the Middle East and North Africa (MENA), economic performance is still lagging behind many regions of the world. Even in those countries that are the most advanced in implementing reforms, including Egypt, Jordan, Morocco and Tunisia, industries with low productivity growth and high market power continue to dominate. Moreover, the termination of the Multi-Fiber Agreement and the negotiations concerning further liberalization of trade in agricultural products (under the framework of the World Trade Organization) put these and other countries under pressure of fierce competition from emerging nations. Recent empirical evidence on the impact of reforms in a number of developing countries shows that such persistence of inefficiency and market power is specific to MENA. Showcasing in-depth analyses from Jordan, Morocco, Tunisia, and Turkey (with comparative data from Asia and Latin America), this book focuses on the dynamics of firm entry and exit to help explain the low productivity of the region. The results suggest a number of policy recommendations designed to foster competition, which, in turn, would contribute to innovation, productivity growth, and improved return on capital investments. The book not only reveals important correlations among policy and market factors in MENA, but suggests fruitful areas of research in other developing regions of the world.

We develop a monopolistically competitive model of trade with firm heterogeneity - in terms of productivity differences - and endogenous differences in the 'toughness' of competition across markets - in terms of the number and average productivity of competing firms. We analyze how these features vary across markets of different size that are not perfectly integrated through trade; we then study the effects of different trade liberalization policies. In our model, market size and trade affect the toughness of competition, which then feeds back into the selection of heterogeneous producers and exporters in that market. Aggregate productivity and average markups thus respond to both the size of a market and the extent of its integration through trade (larger, more integrated markets exhibit higher productivity and lower markups). Our model remains highly tractable, even when extended to a general framework with multiple asymmetric countries integrated to different extents through asymmetric trade costs. We believe this provides a useful modeling framework that is particularly well suited to the analysis of trade and regional integration policy scenarios in an environment with heterogeneous firms and endogenous markups.