Essays on Trade and Productivity: Case studies of manufacturing in Chile and Kenya

Sammanfattning: This thesis deals with various aspects of the relationship between trade and productivity in developing countries. It contains of a general introduction and four separate essays. The essays consist of case studies of the manufacturing sector in Chile and Kenya. The export promotion hypothesis suggests that exports and export policy play a crucial role in stimulating growth. The role of import competition in providing similar benefits has to a large extent been absent in the literature. Essay I contributes to the ongoing debate on trade and productivity growth by examining the existence of a causal relation running from trade and domestic competition to productivity growth in Chilean manufacturing. The results suggest that the Chilean productivity growth during the period 1980 to 1991 was import-led rather than export-led. Essay II examines whether the higher productive efficiency among exporting plants in Chilean manufacturing is a result of learning or self-selection. A method to calculate deviations from potential productivity, referred to as total factor efficiency, using a translog production function is proposed. We found no significant differences in total factor efficiency, technical efficiency or scale efficiency between plants with either a long or a short export history. Plants just prior to the start of exporting are significantly more productive than plants that remain out of the export market. This suggests that relatively efficient firms self-select into the export market. Essay III investigates the link between efficiency and exports in Kenyan manufacturing. Like many similar studies we find that exporters are more efficient than non-exporters. The analysis supports that relatively efficient firms self-select into exports activities, but we also find some evidence in favour of learning from exports. Our results provide no evidence for the hypothesis that trade direction influences either the export effect on technical efficiency or the efficiency effect on exports. However, while the probability to export to other African countries increases with physical and human capital intensity, firm size appears more important for export activities outside Africa. Essay IV investigates the technical efficiency of foreign- and domestic-owned plants in the chemical sector in Chile. The model combines a stochastic frontier production function in which technical inefficiency effects are modelled in terms of ownership and input level. The results indicate that the higher average inefficiency observed among domestic-owned plants stems partly from the inefficient use of capital. Increased use of labour inputs improves technical efficiency for domestic-owned plants, while increased uses of capital reduce efficiency. Thus, the shift towards more capital-intensive production techniques in Chile, following the trade liberalization, may have brought adjustment costs in the form of reduced technical efficiency.