Labour Productivity, Import Competition and Market Structure in Australian Manufacturing

Through altering competitive conditions, globalisation can have a significant impact on productivity of the domestic economy. Foreign competition can stimulate the productivity improvements by domestic firms or it can lead to the elimination of inefficient producers. Alternatively, the threat or reality of foreign competition can impede investment in new equipment and techniques, thereby slowing the adaptation of productivity improvements. Thus, the impact of globalisation on productivity growth needs to be explored empirically. In this paper, we estimate the impact of import competition on labour productivity growth in Australian manufacturing using a panel data analysis for a three-decade period. The estimates extend and complement earlier work by Bloch and McDonald (2001), which applies panel data analysis to a sample of Australian manufacturing firms for a one-decade period. The use of industry level data in place of firm-level data, allows us to include the effects of entry or exit of firms, while the longer time period allows determine whether the impact of import competition on productivity growth changes to following micro-economic reform in the Australian economy. As with Bloch and McDonald, we also examine whether the impact of import competition varies across industries with domestic market structure. Reference: Bloch, H and J T McDonald (2001), Import Competition and Labour Productivity, Journal of Industry, Competition and Trade, 1(3), 301-319.