Trade liberalization and productivity growth in Korean manufacturing industries: price protection, market power, and scale efficiency

This paper examines the dynamic impact of trade liberalization on productivity, market competition, and scale efficiency using a panel data of 36 Korean manufacturing industries over nine subperiods from 1966 to 1988. By accounting for both imperfect competition and non-constant returns, trade liberalization is shown to improve productivity performance, increase competition and promote scale efficiency. Quota protection (QR) had a more significant impact than price protection measures on market structure las reflected in price-marginal cost markups and scale efficiency), vindicating a well-known theoretical proposition about non-equivalence of different trade policy (TP) instruments in imperfect competition. (C) 2000 Elsevier Science B.V. All rights reserved. JEL classtification: F12; F14; O12; O53.