Productivity growth in Latin American manufacturing: what role for international trade intensities?

Faundez, Sebastian and Mulder, Nanno and Carpentier, Nicole (2011): Productivity growth in Latin American manufacturing: what role for international trade intensities? Published in:

Abstract

This paper analyzes the relationship between the intensity of international trade flows and labor productivity for 28 industries in the five main economies in the region (Argentina, Brazil, Chile, Colombia and Mexico)using the Arellano-Bond generalized method of moments (GMM)estimator. The results show that international trade flows contributed through various channels to labor productivity growth in the period 1990 to 2008. These channels, which have been developed in the theoretical literature, are export intensity (share of production exported), import penetration (share of domestic demand covered by imports), the diversification of the export basket and intra-industry trade. The estimation also includes several control variables, of which several turn out significant. In addition to estimates for the total manufacturing sector, we also show results for three different groups of manufacturing industries characterized by different factor endowments: natural resource intensive,labor and capital intensive ones.

• Item Type: MPRA Paper
• Language: English
• Keywords: productivity, international trade, manufacturing, Latin America, labour
• Subjects: F - International Economics > F1 - Trade > F16 - Trade and Labor Market Interactions; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O54 - Latin America ; Caribbean; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J24 - Human Capital ; Skills ; Occupational Choice ; Labor Productivity; D - Microeconomics > D2 - Production and Organizations > D24 - Production ; Cost ; Capital ; Capital, Total Factor, and Multifactor Productivity ; Capacity

References

Arellano, M. and S. Bond (1991), “Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations”, The Review of Economic Studies, 58, 277 – 97.

Aswicahyono, H. H., K. Bird and H. Hill, (1996), “What Happens to Industrial Structure When Countries Liberalise? Indonesia since the mid–1980s”, Journal of Development Studies, 32(3), 340–363.

Aw, B.Y., M.J. Roberts and T. Winston (2005), “The Complementary Role of Exports and R&D Investments as Sources of Productivity Growth”, World Economy.

Bartelsman, E. (2010), “Searching for the sources of productivity from macro to micro and back”, Industrial and Corporate Change, 19 (6), 1891-1917.

Basant, R. And B. Fikkert(1996), “The Effects of R&D, Foreign Technology Purchase, and Domestic and International Spillovers on Productivity in Indian Firms,” Review of Economics and Statistics, 78(2), 187-199.

Blyde, J.S. (2002): “Integration and Technology Diffusion: The Role of Imports of Capital Goods and Foreign Direct Investment,” Inter-American Development Bank.

Bonelli, R. (1992) Growth and Productivity in Brazilian Industries: Impacts of Trade Orientation, Journal of Development Economics, 39, 85–109.

Bhagwati, J. (1988) Export promoting trade strategy: issues and evidence. World Bank Research Observer 3, 27-58. Cabral-Torres,

R., and A. Varella-Mollick (2009), “Intra-industry Trade Effects on Mexican Manufacturing Productivity before and after NAFTA”, Journal of International Trade and Economic Development, May.

Cimoli, M. (ed.) (2005a), “Heterogeneidad estructural, asimetrías tecnológicas y crecimiento en América Latina”, Documentos de Proyectos, Nº 35 (LC/W.35), Santiago de Chile, Comisión Económica para América Latina y el Caribe (CEPAL)/Banco Interamericano de Desarrollo.

Eaton and Kortum (2001), Trade in Capital Goods, Working Paper 8070,National Bureau of Economic Research.

ECLAC (2007), Progreso Técnico y Cambio Estructural en América Latina, Santiago.

Edwards, S. (1998) Openness, productivity and growth: what do we really know? Economic Journal, 108, 385–398.

Ferreira, C. P. and J. Luiz Rossi (2003), “New Evidence from Brazil on Trade Liberalization and Productivity Growth”, International Economic Review, 44 (4), 1383-1405. Grossman, Gene M., and Elhanan Helpman. (1992). Innovation and Growth in the Global Economy.Cambridge, Mass: MIT Press.

Haddad, M., de Melo, J. and Horton, B. (1996) Morocco, 1984–89: Trade liberalization, exports and industrial performance.

Holtz-Eakin, D., W. Newey and H. S. Rosen (1988), “Estimating Vector Autoregressions with Panel Data”, Econometrica, 56, 1371 – 95.

Iscan, Talan (1998), “Trade Liberalization and Productivity-A Panel Study of the Mexican Manufacturing Industry”, Working Papers Archive, Department of Economics, Dalhousie University.

Jenkins, R. (1995), ‘Does Trade Liberalization Lead to Productivity increases? A Case Study of Bolivian Manufacturing,’ Journal of International Development, 7(4), 577-97.

Keller, W. (2004), “International Technology Diffusion”, Journal of Economic Literature, 42, 752-782.

Krugman, P. (1981), “Intra industry Specialization and the Gains from Trade”, Journal of Political Economy, University of Chicago Press.

Kusum Das, Deb (2002), Trade Liberalization and Industrial Productivity: An Assessment of Developing Country Experiences, Working Paper, No. 77, Indian Council for Research on International Economic Relations.

López Córdova, E. (2001): “Las Negociaciones de Acceso a Los Mercados En Los Tratados de Libre Comercio de México con Bolivia y Costa Rica,” in Las Américas Sin Barreras: Negociaciones Comerciales de Acceso a Mercados, ed. by A. Estevadeordal, and C. Robert, chap. X, pp. 213–247. Banco Interamericano de Desarrollo.

Melitz, Marc J. (2003), “The Impact of Trade on Aggregate Industry Productivity and Intra-Industry Reallocations”, Econometrica, Vol. 71, No. 6, pp. 1695-1725.

Maddala, G. S., and Wu, S. (1999). \A Comparative Study of Unit Root Tests with Panel Data and New Simple Test", Oxford Bulletin of Economics and Statistics, 61, 631-652.

Miller, Stephen M. & Upadhyay, Mukti P. (2000), "The Effects of Openness, Trade Orientation, and Human Capital on Total Factor Productivity," Journal of Development Economics, Elsevier, vol. 63(2), pages 399-423, December.

Morley, S., Machado, R. and Pettinato, S. (1999) Indexes of Structural Reform in Latin America, Serie Reformas Economicas 12. Santiago: CEPAL.

Nordas, H.K., S. Miroudot and P. Kowalski (2006), “Dynamic Gains from Trade”, OECD Trade Policy Working Papers, No. 43, OECD, Paris.

Ogunleye, E. O. and R. K. Ayeni (2008), “The Link between Export and Total Factor Productivity: Evidence from Nigeria”, International Research Journal of Finance and Economics, Vol. 22.

Parades, C.F. (1994), ‘Trade Policy, Industrialization and Productivity Growth in Peru: An Overview of the 1970s and 1980s’ in Helleiner.G.K. (ed.), Trade Policy and Industrialization in Turbulent Times, Routledge, London and New York.

Paus, E., N. Reinhardt and M. Robinson (2003), “Trade Liberalization and Productivity Growth in Latin American Manufacturing, 1970–98”, Policy Reform, Vol. 6(1), pp. 1–15.

Pack, H. (1988),‘Industrialization and Trade’ in Chenery,H.and T.N.Srinivasan (ed), Handbook of Development Economics, Amsterdam, North Holland.

Pages, Carmen (ed.) (2010), Era de la productividad, BID, Washington, DC.

Pavcnik, N. (2000), “Trade Liberalization, Exit, and Productivity Improvements: Evidence from Chilean plants”, NBER Working Paper, No. 7852.

Pinheiro, A.C. (1990), ‘Technical Efficiency in Brazilian Manufacturing Establishments: Results for 1970 and 1980,’ IPEA-INPES, Texto Para Discusso Interna, No 190, June.

Rachel Griffith & Stephen Redding & Helen Simpson (2003), "Productivity Convergence and Foreign Ownership at the Establishment Level," CEP Discussion Papers dp0573, Centre for Economic Performance, LSE.

Rodrik, Dani (1988), "Imperfect Competition, Scale Economies, and Trade Policy in Developing Countries," NBER Chapters, in: Trade Policy Issues and Empirical Analysis, pages 109-144 National Bureau of Economic Research, Inc.

Roodman, D. (2006), “How to Do xtabond2: An Introduction to “Difference” and “System” GMM in Stata”, Working Paper, No. 103, Center for Global Development.

Schiff, M., Y. Wang, and M. Olarreaga (2002): “North-South and South-South Trade-Related R&D Spillovers: An Industry-Level Analysis,” World Bank.

Sjoeholm, F. (1999), “Exports, Imports and Productivity: Results from Indonesian Establishment Data”, Working Paper Series in Economics and Finance, 183, Stockholm School of Economics.

Solow, R. (1957), “Technical Change and Aggregate Production Function”, Review of Economic and Statistics, 39, 312-20.

Tybout, J., J. de Melo and V. Corbo (1991), “The Effects of Trade Reforms on Scale and Technical Efficiency: New Evidence from Chile”, Trade Policy Working Papers, No. 481, World Bank.

Tybout, James and Daniel Westbrook (1995), Trade Liberalization and the Structure of Production in Mexican Manufacturing Industries, Journal of International Economics, 39, 53-78.

Weinhold, D. and J.E. Rauch (1997), “Openness, Specialization and Productivity Growth in Less Developed Countries”, NBER Working Paper Series, No. 6131, NBER.

Wacziarg, Romain, (1998). "Measuring the Dynamic Gains from Trade," Policy Research Working Paper Series 2001, The World Bank.

Weiss, John (1992). Trade Policy Reform and Performance in Manufacturing: Mexico 1975-88, Journal of Development Studies, 29:1-23.

Yean, T. S. (1997) Determinants of Productivity Growth in the Malaysian Manufacturing Sector, ASEAN Economic Bulletin, 13(3), 333–343.