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Abstract
We use data on Ethiopian manufacturing firms and commodity-level data on tariffs to examine the effects of trade liberalisation on firm performance. We distinguish the productivity gains that arise from reducing final goods tariffs from those that arise from reducing tariffs on intermediate inputs. We find no evidence that output tariff reduction improves productivity, but we find large positive effects of input tariff reductions. These are robust to alternative productivity measures, treating tariffs as endogenous, and various generalisations of the model. We conclude that policy measures designed to facilitate access to inputs produced abroad may lead to productivity gains.
Acknowledgements
The authors would like to thank one anonymous referee, and participants in seminars at the University of Gothenburg and the Université Paris 1 – Panthéon Sorbonne for their insightful suggestions. We would in particular like to thank Sandra Poncet. The views expressed in this paper are entirely those of the authors. The data underlying the results in this paper can be obtained from the corresponding author.
Disclosure statement
No potential conflict of interest was reported by the authors.