Trade openness and productivity: cross-country evidence from manufacturing firms

This study investigates how trade openness (TOPEN) influences firm s' productivity dynamics in the manufacturing sector by analyzing variations in total factor productivity (TFP), efficiency change (EFFCH) and technological change (TECHCH) across economies with different degrees of high and low TOPEN economies. Using firm s' data from 2011 to 2022, the study applies the Malmquist Productivity Index to capture intertemporal productivity changes and integrates macro factors through Ordinary Least Squares (OLS), Fixed Effects Models (FEM) and the Generalized Method of Moments (GMM) to ensure robustness and address potential endogeneity. The DEA results reveal substantial heterogeneity in productivity performance between high- and low-TOPEN economies. Firms operating in high TOPEN economies exhibit significantly stronger productivity growth, with TFP, TECHCH and EFFCH increasing by 17%, 18.83% and 96%, respectively, compared to firms in less TOPEN economies. These findings demonstrate a pronounced productivity premium associated with TOPEN and underscore its role in accelerating technological upgrading and efficiency improvements at firms. Further findings confirm that TOPEN exerts a positive and statistically significant effect on both TECHCH and EFFCH, with effects markedly greater in highly TOPEN economies.