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not suffer from the subjective nature of the indices constructed nn trade policy distortions.l'l Some caution, however, needs to be exercised in interpreting the changes over time in the tariff rate as measured here. An elimination of duty exemption or a change in the composition of imports can increase the average tariff rate independent of any changes in the statutory tariff rate.

8. Thie regression results for output growth are reported in Table 3. The estimate for the group of intensive adjusters shows that the coefficients on the exchange rate and the import tariff rate are significant but the investment to GDP ratio is not. A devaluation of the currency (a fail in the index, 1980=100) has a positive effect on the GDP growth rate. A reduction in the import tariff rate is associated with increased GDP growth rate. When a measure of capacity utilization is included, the coefficient turns out to be significant and positive. Increased capacity utilization, therefore, also played an important roie in facilitating growth, at least in the short-run. The evidence, thus, suggests that a reduction in the import tariff rate, for a given level of investmnent, is associated with an increased GDP growth rate. This finding is consistent with the data on changes in labor productivity for the trade adjusting countries.

9. In the case of less intensive trade adjusters, the coefficient on the tariff rate, although it has the right sign, is not significant. The coefficient on capacity utilization is highly significant. To test whether the regression results merely reflect a trend, a tine trend is included in the regression; the coefficient on the time trend turned out to be insignificant. The low explanatory power of the equation, however, suggests that other variables, not included in the regression, may have also contributed to output growth.

10. The estimated output equation for the adjusters as a group constrains the coefficient on the tariff variable to be the same across countries. Trade reform, however, may not have a similar effect across countries. The output growth equations were, therefore, re-estimated individually for the trade adjusters. The regression results are reported in Table 4 They highlight the differential impact of trade reform on output growth. A cross-country comparison of the estimated coefficients on the tariff rate shows that it has a significant effect on output growth in Mexico and Turkey but not in Ghana. Similarly, a devaluation had dissimilar effects on output. The estimated coefficient on the real exchange rate for Turkey is almost twice that of Ghana. The findings here support the view that the impact of trade policy reform is also dependent on the economic structure of the adjusting country.' Countries with better human infrastructures (i.e., a higher level of education and literacy) and more diversified production tend to benefit more from productivity-enhancing trade reform. More micro studies, however, would be necessary to establish this proposition more rigorously.

- ' See L. Pritchett, Measuring Outward Orientation in Developiig Countries: Can it Be Done?, PRE WPS 566, January 1991, for a detailed discussion on this subject; see also E. Leamer, "Mcasures of Openness," in R. Baldwin, ed., Trade Policv Issues and Empirical Analysis (Chicago: University of Chicago, 1988).

- Iv For r=ent empirical findings that support a structuUist view of adjustment, see R. Faini and J. de Melo, Adjustment. Investment, and theReal Exchange Rate in Developing Countries, PRE Working Paper No. 473. The World Bank, August 1990. See also H. Chenery, "The Structuralist Approach to Development Policy," American Economic Review, 1975; and H. Chenery, S. Robinson and M. Syrqmin, Industrialization and Growth, OUP, 1986.