Trade Liberalisation and Productivity Growth in the Manufacturing Sector: The Case of Sri Lanka
Yapa M. W. Y. Bandara
Working Paper 12/06
September 2006
About the Authors
Dr Yapa M W Y Bandara is a lecturer in the School of Commerce at Charles Sturt University, Wagga Wagga NSW 2678 Australia
Charles Sturt University – Faculty of Business Working Paper Series
Managing Editor: Associate Professor Jayne Bisman, School of Accounting, Bathurst
Editors: Dr P. Mathews, School of Commerce, Wagga Wagga
Associate Professor M. O'Mullane, School of Business, Albury
Dr R. Tierney, School of Marketing and Management, Bathurst
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Table of Contents
- Abstract
- Sri Lankan Economy; A brief Review:
- Analytical Model Framework, Data, Variables and their construction
- Model Specification and Estimation
- TFP Growth Estimates of Sri Lanka’s Manufacturing Industries
- Conclusion
Abstract
This paper examines structural transformation and Total Factor Productivity (TFP) growth of Sri Lanka’s manufacturing industries in the post-trade liberalization period. The TFP growth estimates are obtained using the Solow residuals approach, while introducing the impact of industry heterogeneity into the estimation procedure through a Fixed Effect model for the first time. It also makes use of a newly compiled balanced panel data set of all manufacturing industries over 21 years after trade liberalization. In terms of TFP growth, manufacturing sector has benefited from economic reforms introduced in 1977. However, the TFP growth trend has started declining since 1994 causing concerns among policy makers. The paper underscores the need for an in depth investigation into the causes (lack of Technological Progress or Technical Efficiency) for the declining TFP growth in order to provide more meaningful insights to the policy debate. The study did not produce sufficient evidence to conclude whether labour intensive industries have performed better than capital intensive industries in the post-reforms era.