Trade liberalisation, inward FDI and productivity within Australia's manufacturing sector

Turnbull, Christopher;Sun, Sizhong;Anwar, Sajid

Abstract

Using a simultaneous equations model, this paper aims to analyse the endogenous relationship among trade liberalisation, inward foreign direct investment and productivity within Australia's manufacturing sector. Using two-digit quarterly time-series data, from 1988 to 2012, we find empirical support for trade liberalisation as a mechanism for improving productivity within the domestic manufacturing sector. However, we find that inward foreign direct investment has not had a statistically significant impact on productivity within the sector. By drawing on these findings, among others, we make some recommendations for Australia’s international trade, foreign investment and manufacturing industry policies.

Journal

Economic analysis and policy

Publication Name

Economic Analysis and Policy

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ISBN/ISSN

0313-5926

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Publisher

Economic Society of Australia

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DOI

10.1016/j.eap.2016.02.004