We examine the link between trade liberalization and aggregate productivity, with a focus on improved market selection resulting from a reduction in trade barriers and in the dispersion of these barriers across producers. Our analysis exploits tariff changes across sectors after the Colombian trade reform. An additional advantage of our analysis is that our TFP measure does not include demand and price effects. We find that reduced trade protection makes plant survival depend more closely on productivity.
Trade and Market Selection: Evidence from Manufacturing Plants in ColombiaMarcela Eslava, John Haltiwanger, Adriana Kugler and Maurice Kugler ,
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Review of Economic Dynamics