Effects Of Trade Reforms Research Articles

REFORMASI KEBIJAKAN PERDAGANGAN INTERNASIONAL DAN DEKOMPOSISI PERTUMBUHAN TOTAL FACTOR PRODUCTIVITY (TFP) PADA INDUSTRI TEKSTIL (ISIC 32) DAN INDUSTRI KIMIA (ISIC 35) INDONESIA: ANALISIS INDEKS FÄREPRIMONT

Theoretically, trade reform is believed to have positive effects on TFP (total factor productivity) in the manufacturing sector. However, empirical studies show mixed evidence about the effect of trade reform on TFP in the manufacturing sector. The objective of this research is to calculate and decompose TFP growth in Indonesian textile (ISIC 32) and chemical (ISIC 35) industries from 1981 to 2000. TFP is calculated and decomposed using the Fare-Primont index according to sub-periods of trade reform. Results show that at two-digit level, both of textile and chemical industry, TFP growth is positive over the period 1981 to 2000. The main difference between the two sectors is on the main driver of TFP growth. While in the textile industry the main driver of TFP growth is technical progress, in the chemical industry the main driver of TFP growth is technical efficiency. In addition, the analysis of TFP growth and its components at the five-digit level of the textile industry and the three-digit level in the chemical industry show that TFP growth and its components vary across sub-sectors and sub-periods. Based on these results, it is better for the government to formulate the policy of international trade reform based on the industry's characteristics. Keywords: Total Factor Productivity, Index Fare-Primont

Effects of Trade Reform on Health and Tourism Sectors of the Reforming Country

Health trade and related tourism have become prevalent in recent times, particularly in countries where quality medical services are provided at a relatively low cost. Therefore, using a competitive general equilibrium trade model, this article theoretically attempts to find possible complementarity between the health sector and the tourism sector in a small open developing economy. While exploring the results, this article also finds the effect of trade reform on factor prices, per unit factor requirement and output of different sectors of the economy. Capital owners are seen to lose with trade reform, while labours and doctors gain. Eventually, both health and tourism sectors are found to be complementary in nature. However, expansion of these sectors is conditional on factor intensity assumption. Following this, we briefly touch upon the possible effects of deglobalisation in such an economy. We find that capitalists gain, whereas both doctors and labours suffer loss. Complementarity between health and tourism sectors persists, and the size of different sectors is again found to depend on factor intensity.

Multi-product firms and product quality

We examine the global operations of multi-product firms. We present a flexible heterogeneous-firm trade model with either limited or strong scope for quality differentiation. Using customs data for China during 2002–2006, we empirically establish that firms allocate activity across products in line with a product hierarchy based on quality. Firms vary output quality across their products by using inputs of different quality levels. Their core competence is in varieties of superior quality that command higher prices but nevertheless generate higher sales. In markets where they offer fewer products, firms concentrate on their core varieties by dropping low-quality peripheral goods on the extensive margin and by shifting sales towards top-quality products on the intensive margin. The product quality ladder also governs firms' export dynamics, both in general and in response to the exogenous removal of MFA quotas on textiles and apparel. Our results inform the drivers and measurement of firm performance, the effects of trade reforms, and the design of development policies.

Trade liberalization and technical efficiency in the Indonesian chemicals industry

ABSTRACTThis article examines the impact of trade reform on technical efficiency on the Indonesian chemicals industry using firm-level panel data. The effects of trade reform on technical efficiency are analysed using a stochastic frontier approach. Two variables represent trade reform in this model: effective rate of protection (ERP) and import ratio (IMP). The findings of the present study suggest that both trade reform variables have significant effects on technical efficiency. The coefficient of ERP has a positive sign and is statistically significant, which means that an increase in ERP increases the inefficiency (or decreases the technical efficiency) of firms in the chemicals industry. The coefficient of IMP is negative and statistically significant, which represents the negative impact of IMP on technical inefficiency (or positive on technical efficiency). Thus, trade reform, a reduction in ERP or an increase in IMP, has an unambiguously positive effect on technical efficiency in the Indonesian chemicals industry.

Competition, Agricultural Trade Reform and Developing Countries

In this paper, we consider the potential impact of market power on the likely effects of trade reform and how this may impact on developing country exporters. The emphasis is on trade reform in agricultural markets, one of the principal features of the Doha Round negotiations, and we discuss the mechanisms via which market power will matter for agricultural markets even if those markets themselves are competitive. Using results from a calibrated theoretical model, we show that the existence of downstream market power in vertical chains is likely to dissipate the potential benefits that would accrue to developing country agricultural exporters following trade reform.

The Urban Informal Sector and Poverty: Effects of Trade Reform and Capital Mobility in India

Studies on formal-informal interactions in the labor markets of developing countries claim that economic reform increases the level of informal activity. Although the extent of such claims differs across countries, it is generally believed that reform is likely to depress informal wage by contracting the formal sector and driving labor onto its informal counterpart. However, available empirical evidence suggests that real wage and real fixed assets in the informal manufacturing sector have risen significantly across most states in post-liberalization India. Using this as a benchmark, we formalize a general equilibrium model of inter-sectoral capital mobility and informal wage to argue that, with limited degree of capital mobility, trade reform reduces the informal wage. This is the conventional wisdom usually obtained under a partial equilibrium framework. However, with increased mobility of capital this result is reversed. We offer detailed empirical evidence on the movements of real wage in the informal sector in India and how this affects poverty at the state level. The basic result on income mobility is corroborated by a primary survey in the province of West Bengal, for which we offer descriptive analysis on household income levels in the province's informal manufacturing and service sectors.

Multilateral agricultural trade reform: Potential impacts of current negotiations on New Zealand*

Multilateral agricultural negotiations are a crucial part of the WTO's Doha Development Agenda, the outcome of which may significantly impact New Zealand. In this paper we review progress and key proposals put forward to date in the negotiations. We use a newly available and significantly improved version of a global trade database to model the potential economic effects of trade reforms that might be agreed in the Doha Round. Our results indicate that New Zealand is likely to experience relatively large aggregate gains from reform, with significant benefits arising from terms of trade improvements. In the event of a successful outcome from the Doha Round, New Zealand's farm sector and agricultural exports are likely to become further dominated by dairy products. We find that increased access to the markets of industrial countries and a rapid phase‐out of agricultural export subsidies are likely to be of particular importance. Efforts to negotiate global reductions in domestic farm support appear to offer the least benefit to New Zealand.

Trade Liberalization and Poverty in Ecuador: A CGE Macro-Microsimulation Analysis

Cross-country analysis of the aggregate growth-poverty link is likely to miss important country-specific detail and possible offsetting forces in the underlying labour market adjustment process. This paper combines a CGE model analysis with a microsimulations approach to analyse the effects of trade liberalization on poverty and income distribution in Ecuador. The CGE model enables us to disentangle the general equilibrium effects of various trade policy scenarios on sector output, employment, factor incomes and household consumption. However, as is typical of CGE models, this analysis only provides distribution results for fairly aggregated groups of workers and a reduced number of representative households. The microsimulations approach adds the full distribution to the analysis and allows simulation of the effects of trade reform on the job status and remuneration of individual workers and thereby on household income distribution and poverty. The macro- microsimulation results indicate that the trade opening in Ecuador induced mild aggregate welfare gains, but rising income inequality due to rising wage differentials between skilled and unskilled workers implies virtually no poverty-reducing effect from trade liberalization.

Evaluating trade reform with many consumers

In this paper we look at the welfare effects of trade reform in the many-consumers case. We show that Pareto-improving reforms with lump-sum taxation or with non-lump-sum taxation are possible in the small country case if sufficient conditions for welfare to rise in

Trade in imperfectly competitive industries: the role of market size and consumer preferences

This study presents theoretical and empirical analyses of market size and consumer preference asymmetries to examine the implications of trade and trade policies for imperfectively competitive food manufacturing sectors. The results show that the effects of trade reforms on imperfectly competitive product trade are counter intuitive if a significant portion of food trade is attributed to market size and preference asymmetries. For example, countries with smaller market gain relatively more from trade liberalization than countries with larger markets because export market opportunities are greater for small countries than for large countries.

The effect of trade policy reforms on labour markets: evidence from India

This paper investigates the labour market impact of the 1991 trade reforms in India using a detailed panel data set on firms in five different import competing industries. We have two main results. First, we find only a small and insignificant effect of the reforms on employment - overall and in each of the five import competing industries. Second, we investigate the relationship between labour demand and mark-ups and find that there is a significant negative relationship between mark-ups and the demand for labour - overall and in four of the five industries studied. This provides evidential support for ‘pro-competitive’ effects of trade reforms on labour markets as suggested by the theory: trade liberalization increases the demand elasticity perceived by firms and induces them to reduce mark-ups and increase their output, thus (in direct contradiction to the predictions of competitive models of trade) inducing an increase in the demand for labour which may at least partially offset the reduction in labour demand caused by other factors.

The unfinished agenda: Indian agriculture under the structural reforms

Employing a dynamic nine-sector, seven-income classes computable general equilibrium (CGE) model for the Indian economy (1985–90). this paper analyses the medium-run effects of (agricultural) trade liberalization. Its focus is on the effects of trade reform on farmers' incentives, because it is often presumed that the lack of adequate incentives constitutes the major constraint on private agricultural investment and the use of modem inputs. The simulation results suggest that, given empirically plausible price response elasticities, the improvement in farmers' incentives consequent upon trade liberalization is unlikely to increase agricultural productivity and real incomes in a broad-based and sustained manner. It is with reference to these results that major technological, social and structural, and organizational barriers to private agricultural investment are discussed and an important role is identified for government intervention in fostering agricultural development.

Trade Liberalization and Unemployment

This paper examines the effect of trade reform on wages and unemployment in a two-sector, three-good economy in which labor is imperfectly mobile across sectors. Wages in the export sector are set so as to minimize turnover costs. The analysis shows that a reduction in tariffs, coupled with an adjustment in lump-sum taxes to equilibrate the government budget, lowers wages in all production sectors in the short and the medium run but has an ambiguous effect on unemployment. Although employment and production of exportables expand in the medium run, the unemployment rate may rise or fall depending on whether the elasticity of wages in the export sector with respect to wages in the nontraded goods sector is lower or greater than unity. Potentially adverse effects may be mitigated in the long run, however, as a result of induced shifts in the structure of production activities.