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THE IMPACT OF TRADE LIBERALIZATION ON FIRM PERFORMANCE IN
DEVELOPING COUNTRIES – NEW EVIDENCE FROM PAKISTANI
MANUFACTURING SECTOR
by
Zara Liaqat
A Dissertation Presented to the
FACULTY OF THE USC GRADUATE SCHOOL
UNIVERSITY OF SOUTHERN CALIFORNIA
In Partial Fulfillment of the
Requirements for the Degree
DOCTOR OF PHILOSOPHY
(ECONOMICS)
December 2012
Copyright 2012 Zara Liaqat
Object Description
| Title | The impact of trade liberlaization on firm performance in developing countries -- new evidence from Pakistani manufacturing sector |
| Author | Liaqat, Zara |
| Author email | zara.25@gmail.com;liaqat@usc.edu |
| Degree | Doctor of Philosophy |
| Document type | Dissertation |
| Degree program | Economics |
| School | College of Letters, Arts And Sciences |
| Date defended/completed | 2012-09-04 |
| Date submitted | 2012-09-18 |
| Date approved | 2012-09-18 |
| Restricted until | 2012-09-18 |
| Date published | 2012-09-18 |
| Advisor (committee chair) | Nugent, Jeff |
| Advisor (committee member) |
Wise, Carol Hsiao, Cheng |
| Abstract | It is generally believed that a rise in foreign competition makes the industrial sector more efficient. By using a novel firm-level data set from a variety of industries in Pakistan, this dissertation revisits the productivity-liberalization link, and investigates the effect of trade liberalization on firm productivity. There is evidence of an increase in competition following trade liberalization in the literature. In a majority of industries, there is reduction in the returns to scale, indicating the existence of inflexible capacity constraints in these industries. Moreover, there is no strong evidence of an improvement in productivity after trade reforms were introduced in the manufacturing sector of Pakistan. ❧ A greater part of this dissertation focuses on the textile industry of Pakistan, and unlike most other studies in the literature which mainly investigate the effect of trade liberalization reforms in developing countries, this dissertation investigates liberalization episode in a developed country and its consequence for firms in a developing country. Furthermore, it highlights sectoral heterogeneity within the manufacturing industry in the effect of trade reforms. In particular, using a sample of 321 textile and clothing companies for the years 1992 to 2010, we analyze the effect of quota phase-outs in the form of the end of Multi-Fibre Arrangement (MFA) on firm-level efficiency. The results differ for the two industries: MFA expiration lead to an increase in the average productivity of textile producing firms but a significant reduction in the mean productivity of clothing producers. We offer several possible explanations for this outcome, such as, a change in input and product mix, entry by non-exporters in clothing sector, and sectoral differences in quality ladders. Within the clothing industry, we compare the productivity of vertically integrated and non-integrated firms to investigate whether or not efficiency gains associated with a given liberalization episode vary across firms depending on their organization. The interaction between trade policies and firm characteristics is a subject of great interest to trade economists at present. Vertical integration is a firm characteristic that has the potential to affect the impact of trade policy on firms. Nevertheless, there are currently relatively few studies on this topic. Therefore, this dissertation addresses a potentially critical missing piece in our understanding of the impact of trade on firms. ❧ A theoretical framework in relation to vertical integration in the clothing industry shows that liberalization causes a change in the relative factor cost of the two types of firms, and consequently, a change in the product range produced by them. One of the difficulties in comprehending the connection between vertical integration and trade is a lack of data. The most innovative facet of this dissertation is to present a data set that includes information on the level of integration within firms, and to merge these data with a natural experiment resulting from the end of the MFA, in order to explore the differential impact of trade liberalization on vertically integrated versus non-integrated firms. This appears to be a fruitful way in which to deal with this subject. The empirical findings illustrate that a higher trade quota, which represents fewer trade barriers, reduces the mean productivity for all clothing firms significantly, though less so for vertically integrated firms than for non-integrated firms. The greater decline in the efficiency of non-integrated clothing firms points to the inability of these firms to benefit from tighter quality control, timely revision of production policies, and greater stability of supplies. |
| Keyword | trade liberalization; productivity; multi-fibre arrangement; Pakistan ❧ |
| Language | English |
| Part of collection | University of Southern California dissertations and theses |
| Publisher (of the original version) | University of Southern California |
| Place of publication (of the original version) | Los Angeles, California |
| Publisher (of the digital version) | University of Southern California. Libraries |
| Provenance | Electronically uploaded by the author |
| Type | texts |
| Legacy record ID | usctheses-m |
| Rights | Liaqat, Zara |
| Access conditions | The author retains rights to his/her dissertation, thesis or other graduate work according to U.S. copyright law. Electronic access is being provided by the USC Libraries in agreement with the author, as the original true and official version of the work, but does not grant the reader permission to use the work if the desired use is covered by copyright. It is the author, as rights holder, who must provide use permission if such use is covered by copyright. The original signature page accompanying the original submission of the work to the USC Libraries is retained by the USC Libraries and a copy of it may be obtained by authorized requesters contacting the repository e-mail address given. |
| Repository name | University of Southern California Digital Library |
| Repository address | USC Digital Library, University of Southern California, University Park Campus MC 7002, 106 University Village, Los Angeles, California 90089-7002, USA |
| Repository email | cisadmin@usc.edu |
| Archival file | uscthesesreloadpub_Volume4/etd-LiaqatZara-1203.pdf |
Description
| Title | Page 1 |
| Full text | THE IMPACT OF TRADE LIBERALIZATION ON FIRM PERFORMANCE IN DEVELOPING COUNTRIES – NEW EVIDENCE FROM PAKISTANI MANUFACTURING SECTOR by Zara Liaqat A Dissertation Presented to the FACULTY OF THE USC GRADUATE SCHOOL UNIVERSITY OF SOUTHERN CALIFORNIA In Partial Fulfillment of the Requirements for the Degree DOCTOR OF PHILOSOPHY (ECONOMICS) December 2012 Copyright 2012 Zara Liaqat |
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