The effects of trade reforms on scale and technical efficiency. New evidence from Chile

This paper analyzes the changes in industrial sector performance that accompanied Chile's dramatic trade liberalization of the 1970s. Comparisons of pre- and post-liberalization manufacturing census data reveal little productivity improvement overall. However, adverse macro conditions may have masked the positive effects of trade reforms: industries undergoing relatively large reductions in protection experienced relatively large improvements in average efficiency levels, and relatively large reductions in cross-plant efficiency dispersion. These conclusions are based on maximum likelihood technology estimators that deal with measurement error and incomplete observations.