PRODUCTIVITY, IMPERFECT COMPETITION AND TRADE REFORM - THEORY AND EVIDENCE

Research on productivity often examines the relationship between productivity increases and structural changes in an economy, such as trade policy reform. If, however, policy reforms affect the nature of competition, then the productivity changes associated with trade reform may be mismeasured. Using a panel of manufacturing firms in the Cote d'Ivoire, this paper measures changing profit margins and productivity following a 1985 trade reform. The paper also exploits cross-section differences in protection, using data on tariffs and import penetration. Ignoring the impact of liberalization on competition leads to biased estimates of the relationship between trade reform and productivity growth.