Review of Industrial Organization 19: 407–423, 2001.
© 2001 Kluwer Academic Publishers. Printed in the Netherlands.
The Effects of Global Competition on Total Factor
Productivity in U.S. Manufacturing
LOUIS H. AMATO and CHRISTIE H. AMATO
University of North Carolina at Charlotte, 9201 University City Blvd., Charlotte, NC 28223, U.S.A.
E-mails: Ltamato@email.uncc.edu, Chamato@emaiI.uncc.edu
Abstract. This paper utilizes an instrumental variables approach to investigate the relationship
between growth in total factor productivity and growth in imports and exports. Empirical models
are based on a sample of Census years covering the period 1977–1992, with 1986 substituted for
Census year 1987. The most important ﬁnding is that export growth positively impacts growth in
total factor productivity for the pooled model and for every year of the sample. Growth in imports
has a positive impact on TFP for the pooled model and in two of four sample years.
Key words: Exports, imports, total factor productivity.
Competition’s role in determining productivity levels has intrigued industrial eco-
nomists for several decades. Most prior empirical studies focused on domestic
market structure as an explaining factor for cross-sectional differences in pro-
ductivity. Among these, studies by Greer and Rhoades (1976), and Amato et al.
(1981) suggest that seller concentration exerts a positive and statistically signiﬁcant
impact on productivity growth but the relationship appears to weaken when vari-
ables capturing inter-industry differences in technological opportunity are included
in productivity growth models (Scherer and Ross, 1900). Recent structural changes
in the world economy document the increased importance of global competition
suggesting a need for empirical research that examines the impact of imports
and exports on productivity growth. Unfortunately, little empirical research has
examined the role of international competition in determining differences in pro-
ductivity gain across industries. The purpose of this paper is to expand upon the
previous research by developing and testing a model that relates growth in total
factor productivity to levels of international competition.
The ﬁrst empirical studies to examine the impact of international competition
on domestic producers focused on the effect of imports on proﬁtability and prices.
Domowitz et al. (1986) included import ratios in their price-cost margin models,
The authors wish to acknowledge the helpful comments of an anonymous referee. Any errors
or omissions remain the authors’ responsibility.