1. THE THEORY OF PRODUCTIVITY GROWTH AND ITS LINK TO TRADE

It is a mistake to think of productivity growth as an orderly shift in the production function of the representative plant. Gradual processes of technological diffusion or the displacement of inefficient plants with efficient ones are what matter. Trade orientation may affect these processes through many channels. Exposure to increased foreign competition is found to be associated with improvements in the average level of techni-cal efficiency, reductions in the cross-plant dispersion in technical efficiency, and reduc-tions in plant size. However, preliminary work suggests no clear link between trade policies and patterns of entry and exit. This article brings together diverse literatures on the measurement of produc-tivity and its relation to trade regime, focusing on recently developed techniques and their application. Section I briefly reviews the theoretical arguments linking trade policy and productivity. Empirical work at the sector and macro level is discussed in section II, and plant level empirical work is discussed in section 1:1. Applications of the different approaches are reported for a sample of semi-industrial countries that have recently been analyzed in the World Bank researc