Input-quality Upgrading from Trade Liberalization on Firm Productivity: Evidence from Ethiopian Manufacturing Firms

Using a panel of firms in Ethiopian manufacturing covering the period 2000–2016, this paper investigates the impact of input trade liberalization on firms’ input quality-upgrading and productivity. We estimate quality of imported-input and firm level productivity; then we estimate the effect of input tariff cut on input quality and firms’ productivity. We find a result that a reduced input tariff is associated with firms’ input quality upgrading and further with firms’ productivity. The effect of tariff cut is more pronounced for input importing firms and our result implies that the effect of input tariff cut benefit firms import input more intensively than others. Hence, further input trade liberalization measures should be designed to help key strategic industries of which their productivity is a basis for further enhance production capacity of an economy