Trade Liberalization and Productivity Performance: Evidence from the Australian Passenger Motor Vehicle Industry

Abstract

This paper contributes to the ongoing debate about the effects of trade liberalization on productivity performance of the Australian passenger motor vehicle industry, which has experienced significant liberalization over the years. Our analysis indicates that trade liberalization had a negative impact on productivity growth, at least in the immediate post-liberalization period. Empirical results suggest that economies of scale and tariff protection improve productivity, while industry assistance (such as the local content and duty drawback schemes and production subsidies) retards productivity. Policy implications of these findings are that there are dividends in terms of improved productivity by encouraging economies of scale, providing tariff protection and lowering industry assistance.

An Analysis of Trade Performance of the Australian Passenger Motor Vehicle Industry: Trends, Patterns, and Determinants

“…In summary, our results suggest that protection and IA reduce IP in the Australian PMV industry. These findings together bring home an important message that lowering NRP and IA, by increasing import competition, may help improve the productivity performance of the Australian PMV industry (Bopage, 2010).…”

“…Information concerning the use of dummy variables for export incentives, government assistance and foreign investment was obtained from government files and record, interviews with automotive executives, Lloyd (2008) and Bopage (2010).…”

Liberalization and Structural Change in Australian Automotive Industry: An Analysis of Trade and Productivity Performance: 1962–2008

“…Studies on the effects of liberalization on the AAI are extremely limited and the available studies largely focus on trade structure. Only a few studies that have examined the effects of globalization on the AAI have concluded that trade restrictions thwart the growth of industry, prevent economies of scale due to the small size of domestic market and contribute to inefficiency (Bopage, 2010). In an attempt to examine the effects of policy liberalization on the AAI, the Industry Commission (IC, 1997) examined (i) factors affecting the automotive industry in Australia; (ii) how a reduction in assistance has created a more competitive environment and (iii) how the industry would evolve through the following decades within an environment of trade liberalization.…”

“…2.See, Bopage (2010) and literature cited therein for studies examining trade performance of the AAI.…”