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Trade Liberalization and Productivity Growth: Evidence from Indian Manufacturing
Author(s) -
Chand Satish,
Sen Kunal
Publication year - 2002
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/1467-9361.00145
Subject(s) - economics , total factor productivity , productivity , liberalization , free trade , international economics , manufacturing sector , international trade , empirical evidence , macroeconomics , market economy , philosophy , epistemology
The impact of trade liberalization on productivity growth is still an empirical issue; the theoretical literature is as yet unclear on the direction of any such association. This paper develops an analytical framework and employs it to empirically test whether trade liberalization in Indian manufacturing has raised total factor productivity (TFP) growth. The answer is in the affirmative. The results also support a key postulate of the new growth theories, that liberalization of the intermediate‐good sectors has a larger favorable impact on TFP growth than that of the final‐good sectors.