In this paper I analyze the productivity gains from trade liberalization in the Belgian textile industry. So far …, empirical research has established a strong relationship between opening up to trade and productivity, relying almost entirely … on deflated sales to proxy for output in the production function. The latter implies that the resulting productivity …

, distortions in the supply of non-traded inputs, and perverse incentives for informality creates a drag on productivity growth …

show that this dominance is inconsistent with use of a productivity-based allocation of quota licenses by the Chinese … government. Our counterfactual implies that elimination of misallocated quotas raised the overall productivity gain of quota …