Trade, Technology and Productivity: A Study of Brazilian Manufacturers 1986-1998

49 Pages Posted: 7 Apr 2004  

Marc-Andreas Muendler

University of California, San Diego (UCSD) - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: March 2004

Abstract

Brazil's trade liberalization between 1990 and 1993, and its partial reversal in 1995, are used to study how reduced inward trade barriers affect productivity. The production function of Brazilian manufacturers is estimated at the ISIC3 two-digit level under various alternatives, including an extension of Olley and Pakes' (1996) procedure. Firm-level productivity is inferred and then related to trade. Findings suggest that (1) foreign competition pressures firms to raise productivity markedly, whereas (2) the use of foreign inputs plays a minor role for productivity change. (3) The shutdown probability of inefficient firms rises with competition from abroad, thus contributing positively to aggregate productivity. Counterfactual simulations indicate that the competitive push (1) is an important source of immediate productivity change, while the elimination of inefficient firms (3) unfolds its impact slowly.

JEL Classification: F14, F43

Suggested Citation

Muendler, Marc-Andreas, Trade, Technology and Productivity: A Study of Brazilian Manufacturers 1986-1998 (March 2004). CESifo Working Paper Series No. 1148. Available at SSRN: https://ssrn.com/abstract=525924

Marc-Andreas Muendler (Contact Author)

University of California, San Diego (UCSD) - Department of Economics ( email )

9500 Gilman Drive
La Jolla, CA 92093-0508
United States
858-534-4799 (Phone)
858-534-7040 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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