Trade liberalization and inter-industry productivity spillovers: a dynamic spatial panel approach

The use of trade liberalization to enhance manufacturing productivity has been a commonly applied policy in several developing countries since the 1980s. This paper proposes a new methodology to estimate the inter-industry productivity spillovers that may occur in such reforms. The findings from a study of the Brazilian trade liberalization episode (1989-1998) indicate that inter-industry productivity spillovers exist, are positive, and account for 70% of the increase in productivity that results from a reduction in import tariffs.