Abstract
This paper examines the effects of trade liberalization on industrial development in Latin America. It suggests that there may be a tradeoff between static (X-efficiency, allocative efficiency) and dynamic efficiency effects, in particular, for countries that do not have a developed industrial base. A review of empirical evidence on several indicators of efficiency shows that X-efficiency and allocative efficiency effects occur but are not very strong. Other factors may be more important for bringing about productivity growth and structural change. Even for Latin American countries with a more developed industrial base (Argentina, Brazil, Mexico), dynamic efficiency effects from trade liberalization do not come about automatically.
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