Openness and Total Factor Productivity in Swedish Manufacturing Industry 1980-95

This paper studies the effect of openness on total factor productivity growth. Using industry level data for Swedish manufacturing during the period 1980-95, the paper shows that economically integrated industries tend to be more engaged in R&D and have more entry and exit activity than other industries. The results show that domestic R&D intensity does not contribute to the growth rate of total factor productivity. Instead, openness to international markets, which helps facilitate technology spillovers, contributes to the growth of total factor productivity. There is also some evidence that producers exiting the market are less productive, implying that such exits will increase the average productivity of the industry.