Liberalization, growth and structural change: evidence from Nepalese manufacturing

This paper presents an empirical analysis of the consequences of liberalization on industrial structure in Nepal, a least developed country with weak institutions and severe infrastructure bottlenecks. Results suggest some structural change in manufacturing output and trade orientation which appears to be due to a change in incentive structure, but no significant improvements were recorded in total factor productivity growth which is of central importance for a least developed country like Nepal. Export intensity rose significantly in the postliberalization period despite poor productivity performance of export-oriented industries while import intensity fell due mainly to improved competitiveness in import competing industries and a fall in imports for smuggling to India.