Average efficiency declined over the years 8 Semiparametric Estimation

# Average efficiency declined over the years 8

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Average efficiency declined over the years. 8
Semiparametric Estimation (Levinsohn & Petrin, 2003) Regress change in firm productivity on the adjusted level of quotas: Empirical Methodology 9
Balance Sheet Data of Pakistani Listed and Non Listed Companies (BSDPC) is a survey of a representative sample of 321 companies for the years 1992 2003. Brambilla, Khandelwal, and Schott (2007): U.S. trading partners’ Expired Performance Reports used by the U.S. Office of Textile and Apparel (OTEXA) to monitor trading partners’ compliance with MFA/ATC quotas. Document imports, base quotas and quota adjustments by OTEXA category and year for all countries with which the US negotiated a quota arrangement. Bernard, Jensen, and Schott (2006b): Free on board customs value of imports, ad valorem duty and ad valorem freight and insurance rates for the underlying product level U.S. import data. Data 10
Endogeneity Relationship between openness and performance can be taken to imply causality: Liberalization not a part of broader package of reforms MFA Expiration can be thought of as a ‘natural experiment’ Lobbying by firms? Regress change in firm productivity on the adjusted level of quotas at the six digit NAICS industry level. Structural techniques proposed by Olley & Pakes and Levinsohn & Petrin take care of endogeneity in the estimation of production function. 11
Table 1: Effect of Elimination of Quota Restrictions on Textile Firm Productivity Levinsohn & Petrin (1) (2) (3) (4) (5) (6) Adjusted Quota 0.0146 0.125 0.0376 0.577** 0.593** 0.599** (0.105) (0.113) (0.123) (0.286) (0.286) (0.286) Cost of Imports 0.0631 0.0355 0.03 0.0311 0.0316 (0.169) (0.151) (0.156) (0.156) (0.156) Age 0.0295 0.0658 0.0374 0.0453 (0.151) (0.164) (0.166) (0.166) Age 2 0.00663 0.0148 0.00252 0.00621 (0.0376) (0.0397) (0.0411) (0.0414) Herfindahl Index 0.00467 0.00484 0.00491 (0.0251) (0.0251) (0.0251) Multinational 0.314 0.318 (0.29) (0.291) ISO Certified 0.512 (0.628) Industry Fixed Effects Yes Yes Yes Yes Yes Yes Time Fixed Effects Yes Yes Yes Yes Yes Yes City Effects Yes Yes Yes Yes Yes Yes No. of Observations 1216 1146 765 709 709 709 12
Table 2: Effect of Elimination of Quota Restrictions on Clothing Firm Productivity Levinsohn & Petrin (1) (2) (3) (4) (5) Adjusted Quota 0.012 0.0763 0.077 0.079 0.0791 0.0967 0.12 0.119 0.0781 0.0791 Cost of Imports 10.55*** 10.37*** 13.28*** 13.28*** 3.66 3.652 3.108 3.196 Herfindahl Index 0.131 0.170* 0.170* 0.102 0.103 0.103 ISO Certified 0.747*** 0.745*** 0.221 0.223 Multinational 0.152 1.05 Constant 10.88*** 10.48*** 10.29*** 8.042*** 8.041*** 1.684 2.451 2.431 1.366 1.384 Industry Fixed Effects Yes Yes Yes Yes Yes Time Fixed Effects Yes Yes Yes Yes Yes City Effects No Yes Yes No No No. of Observations 407 389 389 391 391 13
MFA expiration will potentially boost competition, thereby resulting in technological advancement and productivity growth. The MFA expiration led to an increase in the average productivity of textile producing firms but a significant reduction in the mean productivity of garment producers. Historically a relatively better textile sector Harder to upgrade quality in the garment sector Changes in product mix shift to the production of lower value products Failure to fight the competition Non exporting firms become exporters need time to adapt to new environment Change in composition of textile exports, from a broader category that benefits from MFA, to a narrower category focused on specific markets that offer

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• Spring '17
• JAMES FENSKE

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