Trade liberalization, firm performance, and labor market outcomes in the developing world : what can we learn from micro-level data?," Policy Research Working Paper Series N. 3063, The World Bank

We review the micro-level evidence on the effects of trade and investment liberalization in the developing world. We focus, in particular, on the effects of the 1991 trade reform in India, since it provides an excellent controlled experiment in which the effects of a drastic trade regime change can be measured. The main findings can be summarized as follows. 1) There is evidence of trade-induced productivity gains (in this respect, however, India is something of an exception); 2) These gains mainly stem from the intra-industry reallocation of resources among firms with different productivity levels and: 3) they are larger in import competing sectors; 4) There is no evidence of significant scale efficiency gains. Indeed, unilateral trade liberalization is often associated with a reduced scale efficiency; 5) There is evidence of a pro-competitive effect of trade liberalization; 6) There is no evidence either of learning-by-exporting effects o