Abstract

This paper investigates the trade liberalization effect on the total factor productivity in Iranian industrial firms during the years 2000-2004. For the purpose of modeling and estimating the trade policies’ effect on the productivity, initially the total factor productivity of the firms have been estimated adopting production function approach, and then it’s relationship with the custom tariff rate and the firm features (size, ownership type: private, estate owned, cooperative), and the concentration degree of the industry relating to that firm) has been estimated in an econometric equation framework.
The research findings indicate that the trade policy effect (tariff) on the total factor productivity of the industrial firms has been negative, and the trade policy effect (tariff) on the productivity is different considering the firm features; so that the tariff rate effect on the private firms’ productivity is stronger than on the state owned firms. Also the trade policy effect (tariff) on the productivity of the firms with higher degree of monopoly is stronger than the competitive firms.