Openness and economic efficiency: evidence from the chilean manufacturing industry

Abstract

This paper highligts a long-standing debate on whether openess does help economic efficiency in the light of the data for chilean manufacturing industry. To do so, we analyze the TFP growth during the period of the abrupt trade reform in the seventies. This data base provides evidence favoring the hypothesis that a shift towards a condition of laissez faire substandeally improves productivity in the economy. In actual fact, during the period 1975-1979, the annual rate of TFP growth in the manufacturing industry was 4.35 percent yearly on average. However, for the period 1980-1982 this growth was -0.67.

The sectors whose productivity increased at a greater speed, in the first years of the reform, where those associated with natural competitive advantages. Subsequently an increase in those industries which are more capital intensive was recorded. This contrasts whith some results which were obtained earlier and confirms others which are addressed in the paper.