Protección y productividad: Causas y consecuencias de aislar sectores en una economía pequeña.

Abstract

This paper aims to identify the productive sectors that can be isolated from international competition, analyzing the impact on productivity arising from a trade liberalization process. We focused on the case of Uruguay and select a basket of goods that show signs of not being competitive on a non-national scale and, at the same time, have a protection tool that takes the form of non-tariff barriers. In turn, we analyze the effects of protection on sector productivity through a difference-in-difference approach, finding that domestic protection in a context of economic liberalization has a negative impact on firms' productivity. Finally, a quick analysis from the political economy reveals that there are winners and losers in the process of trade liberalization. This makes the exclusion of sensitive sectors a viable mechanism for an opening that otherwise would not be a political equilibrium.trade protection, non–tariff barriers, productivity, difference in–difference model