《Trade liberalization and the dimensions of efficiency》.pdf

Journal of INTERRATIONAL ECONOMICS ELSlER Journal of International Economics 39 (0000) 53-78 Trade liberalization and the dimensions of efficiency change in Mexican manufacturing industries James R. Tybout*, M. Daniel Westbrook+ Department of Economics, Georgetown University, Washington, DC 20057-1045, USA Received March 1993, revised version received September 1994 Abstract Did Mexico’s recent trade liberalization generate productivity gains? We find that average costs fell in most industries, with tradeable goods producers registering the largest reductions. Among importables, these cost reductions trace partly to improvements in relative productivity. Among exportables, they are due to favorable changes in relative prices, probably because imported intermediate goods became cheaper. Gains due to scale economy exploitation were minor and were not correlated with increases in foreign dompetition. Hence the results cast some doubt on simulation studies of trade liberalization that stress scale effects as a major source of efficiency gain. Key words: Trade liberalization; Productivity; Scale economies; Mexico JEL classification: F14; 012 * Corresponding author. ’ This paper was funded by Mexico’s Secretary of Commerce and Industrial Development (SECOFI), Office of Trade Negotiations. We thank Hans-Martin Boehmer and Je