Import Tariffs and Productivity of Manufacturing Firms in Indonesia

Abstract

This study estimates the effect of changes in the output tariffs and input tariffs as measured by the weighted average of most favored nation (MFN) tariffs and preferential tariffs on firm productivity in manufacturing industry. Estimation results using Indonesian manufacturing firms’ unbalanced panel data from 2007 to 2014 indicate that the output tariffs do not have a significant impact on firm productivity, while decreasing input tariffs can increase the productivity of the firm. Similar results are also obtained if the amount of output tariffs and input tariffs is measured by MFN tariffs.