Trade liberalization, intermediate inputs, and productivity: Evidence from Indonesia

Mary Amiti, Jozef Konings

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506 Citations (Scopus)

Abstract

This paper estimates the productivity gains from reducing tariffs on final goods and from reducing tariffs on intermediate inputs. Lower output tariffs can increase productivity by inducing tougher import competition, whereas cheaper imported inputs can raise productivity via learning, variety, and quality effects. We use Indonesian manufacturing census data from 1991 to 2001, which include plant-level information on imported inputs. The results show that a 10 percentage point fall in input tariffs leads to a productivity gain of 12 percent for firms that import their inputs, at least twice as high as any gains from reducing output tariffs.

Original languageEnglish
Pages (from-to)1611-1638
Number of pages28
JournalAmerican Economic Review
Volume97
Issue number5
DOIs
Publication statusPublished - Dec 1 2007

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ASJC Scopus subject areas

  • Economics and Econometrics

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