## **_Productivity-enhancing impacts of reform_**

Economists have long been convinced that participation in international trade provides a bonus through improvements in productivity. Most of the investigation of these gains has been empirical, based loosely on Arrow’s (1962) concept of learningby-doing. Major contributions to this literature include Feder (1983), Dollar (1992) and Sachs and Warner (1995), all of which find strong links between export performance and economic growth. Rodriguez and Rodrik (2001) raise concerns about the robustness of the estimated relationship between aggregate exports and productivity growth. During the same period, Clerides, Lach and Tybout (1998) questioned the learning-by-doing framework based on firm-level findings that exporting firms were more efficient before entering export markets, rather than because of learning-by-doing after entering these markets.

More recent research on the aggregate links between exports and productivity growth has more carefully examined the potential endogeneity of the relationship, and continues to find an aggregate relationship (Frankel and Romer 1999). A number of subsequent firm-level studies have re-examined the relationship between exporting and growth, and have found evidence of productivity growth associated with learningby-doing after firms enter exporting. Blalock and Gertler (2005) find an increase in firm productivity of between 2 and 5 percent after Indonesian firms enter export markets. Fernandes and Isgut (2006) find evidence of an increase in productivity from learning-by-exporting when Colombian firms entered export markets. Van Biesebrock (2004) finds that African exporting firms had higher productivity before entering export markets, and that their productivity levels, and their subsequent rates of productivity growth, increased after entering export markets. Girma, Greenaway and Kneller (2004) also find both higher initial levels of productivity and higher productivity growth rates after entry into exporting.

To date the econometric literature on the growth benefits of trade liberalization provides little guidance on how long the dynamic effects from a one-off trade reform will last. This is yet another are requiring further empirical research.

## **_Modeling labor market and migration responses to immigrations restrictions_**

Labor markets are very crudely modelled in global CGE models, partly for simplicity but also because of the difficulties in compiling internationally comparable data on skill levels and occupations. This problem is compounded when one abandons the assumption of no international labor flows and seeks to model the effects of altering restrictions on immigration. The approach adopted in the World Bank (2006) study cited above is but a start to addressing this issue, and much scope remains for further work in this area. More empirical research is needed also on the costs associated with international migration to both the migrants and to (particularly host country) governments.

# **Conclusion**

The theory and available evidence surveyed above show that subsidies and trade barriers, including restrictions on the international movement of labor, are wasteful. Pre-announced, gradual reductions in them, especially if done multilaterally, would yield huge economic benefits and relatively little economic cost, and hence extremely 38