DOES TRADE LIBERALIZATION IMPROVE PRODUCTIVITY? PLANT LEVEL EVIDENCE FROM TURKISH MANUFACTURING INDUSTRY

Şule ÖZLER (UCLA)
Kamil YILMAZ (Koç University)

Applying the methodology developed by Levinsohn and Petrin (2001) on plant level data for Turkish manufacturing sector, we estimate production functions and calculate total factor productivities for 24 three-digit SIC industries over the 1983-96 period. Our analysis of the productivities show that during periods of rapid decline in protection rates productivity gains are largest. Second, productivity gains are largely due to reshuffling of resources from less to more productive plants. Finally, regressions of productivity on nominal protection rates show that reduced protection improves productivity in import competing sectors, a result which is robust to possible effects of the real exchange rate as well as the public sector wage hikes.