**Table** 1: LABOR **PIROJCflVWTY** IN **THU** t4ANUFACIURINC SECTOR

Clsl - 100)

|Red**Ouq**||||||||||**AV-ag**||
|---|---|---|---|---|---|---|---|---|---|---|---|
|**perWorker**|**197I3**|**19**|**9190**|**293**|**KW**|**23**|1914|**29,5**|**1936**|**1972**|**190-3**|
|**Cokmt**|94.9|**INA**|**M0.0**|105.8|**101.3**|17.4|_114.5_|**22I1**|**1373**|101.4|**221.3**|
|**bScaiz**|**36.**|**961**|**200.0**|113.1|117.4|**1287**|133.0|1413|**15.3**|**QL.6**|**139.7**|
|**Makdw**|99.3|IILI|100.0|**99A**|**97.1**|**0.0**|_1113_|112A|106.7|**9.7**|10.3|
|**_PAktn_**|7L4|**IL2**|**2100.0**|I2L4|12Z.5|**1360**|1393|**144.**|152.6|99.1|1432|
|T-<br>**qy**|112.0|95.6|**100.0**|119.2|**26.0**|**127.3**|**131.9**|133L9|**257.9**|110.6|**139.1**|
|**Avcea**|94.2|97.0|**10.0**|**209.2**|113.0|IZ16|**126.0**|133.1|142.1|2aL7|130A|

**to** 1991 **is xueatnm period ah 198336** is **Saj ped.**

**_sca:_ World Table. Wold Bl**

5. The issue is whether the improvement in labor productivity can be linked to trade liberalization, iLe., whether output per worker increased in response to reductions in the level of import protection. This is verified by examining if labor productivity is systematically rented to the level of import protection. Import protection is measured by the average tariff rate (ratio of total import duties collected to the CIF value of import) since most trade adjusting countries had managed to reduce QRs on imports'i Figure I plots the relationship between labor productivity and the average tariff rate based on a simple regression equation for labor productivity where the tariff rate appears as the explanatory variable. It shows a negative relationship between the tariff rate and labor productivity, i.e., an increase in labor productivity is associated with a reduction in the tariff rate. When the sample is restricted to include only the intensive adjusters (Idonesia, Mexico and Turkey),!' the explanatory power of the equation increases and the tariff rate becomes more signifcant (equation 2 under Figure 1). The evidence confirms the linkage between miceased iLmport competition and improvements in productivity. The following sections examine the linkage between import liberalization and the GDP growth rate.

6. Output Growth. Table 2 shows the data on annual real GDP growth rate for the nine trade adjusters. For the adjusters as a group, the average anmual real GDP growth rate increased from 3.6% in 1978-82 to 4% in 1986-89. The trade adjustment program, therefore, is associated with improved growth performance. The table also compares the average GDP growth rate for the intensive and less intensive trade adjusters. The intensive adjusters increased their annual real GDP growth rate from 3.8% in 197842 to 4.7% in 1986-89; the growth rate for the less intensive adjusters did not change significantly. The intensive adjusters, thus, benefitted more from the adjustment programs than did the less intensive adjusters. There were, however, significant differences within the group. While Indonesia's economy expanded more rapidly compared to the other intensive adjusters, Cote d'Ivoire's economy contracted amongst the less intensive trade adjusters.

- u See Thomas, V, and J. Nash, Best Practices in Trade Policy Reform, OUP, and Trade Policy Reforms Under Adjustment Programs, OED, 1991.

- 9' The intensive trade adjusters reduced QRs as well as the average tariff levels on imports; the less intensive adjusters are classified as those which managed to reduce QRs only but not the tariff levels.