# **Notes**

> 1See Restuccia and Rogerson (2013) for a review on misallocation.

> 2The price-cost margins a l`a Hall (1986, 1988), requires an estimation of a production function to measure markups. Standard approaches to estimate production function exhibit biases when factors such as demand shocks and quality of inputs are confounded in productivity estimates (Foster et al., 2008; De Loecker, 2011). Following De Loecker et al. (2016), the article amends this shortcoming by including input price bias in the production function estimation.

> 3Hirschman (1968) identified balance of payments difficulties, deliberate development policy, gradual growth of income, and wars as the four main reasons that lead to the spread of import substitution policies in developing countries.

- 4The quest for rapid industrialization was the theme of the Second Development Plan adopted by the

- then government.

- 5For a detailed description of policy actions by each government, see Killick (2010). Notice that these

- trade restriction measures were implemented in spite of Ghana being a member of GATT.

- 6Ghana had 5 Heads of State during the crisis period, each with an average of 1.42 years in office.

- 7See Goldberg and Pavcnik (2016) on the discussion of a similar situation in India, where IMF dictated

- trade liberalization.

- 8The sub-section 2.2 provides detailed information on the sources of tariffs data.

> 9In this article simple average tariffs aggregated at the three-digit sector level were used for the estimation of the main specification. Results of replication using trade-weighted average tariffs are available from the author upon request.

- 10From the labor market setting outlined above, the efficient bargaining and monopsony settings require

- further comment, with particular emphasis on the monopsony case.

- 11All other notation is as earlier.

> 12Steel (1972) recounts actions by various governments to retort to tariffs to raise revenue. A detailed explanation of such behavior is presented under historical political economy theory as “Gatekeeper States” in Cooper (2002).

- 13The correlation between average tariffs over the period 1991-1995 and tariffs in 1991 is 0.75, indicating

- a nondramatic change in tariffs between 1991 and 1995. Moreover, using average tariffs generate similar results (see Appendix C).

- 14Because of large differences in wage levels, real wage were converted into an index with 1991 as the

- base year.

- 15A snapshot of employment during the same period showed a stable trend.

- 16Nonlinearity in time trend was controlled for by including time-squared in the estimation equations.

- The t-statistic was not significant in four columns. Additionally, a further test on equality of the coefficients of time and time squared was not rejected. Hence, time squared was dropped from the final results.

- 17The author thanks an anonymous referee for this suggestion.

- 18Caselli et al. (2018) documents evidence of persistent negative price-cost margins in French manufactur-

- ing firms for the period 1990-2007. Persistent markdowns suggest ineffective market selection mechanism whereby less successful firms exit the market.

> 19Clearly, trade volume is influenced by tariffs, which creates endogeneity problems. Other trade variables such as real exchange rate and purchasing power parity vary at country level and not industry level, making them unsuitable as instruments for this exercise.

# **References**

Ackerberg, D. A., K. Caves, and G. Frazer (2015). Identification Properties of Recent Production Function Estimators. _Econometrica 83_ , 2411–2451.

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