The Impact of Protection on Observed Productivity Distributions

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Title: The Impact of Protection on Observed Productivity Distributions
Authors: Bagayev, Igor
Davies, Ronald B.
Permanent link: http://hdl.handle.net/10197/8376
Date: Feb-2017
Abstract: As is well established, one prediction of the heterogenous firms literature spearheaded by Melitz (2003) is that trade liberalization, by increasing import competition, drives less productive domestic firms from the market. This increases average productivity of the domestic economy via the “selection effect”. In addition, it has the potential to affect the skewness of the observed productivity distribution, i.e. the gap between the productivity of the median firm and average productivity. We examine these predictions empirically using data on 28 sectors across 99 countries. On the whole, we find that higher protection levels lower average productivity and drive a larger wedge between mean and median productivity. This latter suggests that policy decisions based on mean outcomes may arrive at different conclusions than those based on median voters.
Type of material: Working Paper
Publisher: University College Dublin. School of Economics
Keywords: Productivity distributionHeterogeneous firmsNon-tariff measures
Language: en
Status of Item: Not peer reviewed
Appears in Collections:Economics Working Papers & Policy Papers

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