ABSTRACT
As with Santos-Paulino (2002), the coefficient on duties for the African sub- sample is insignificant (although it is a small sample).Wu and Zheng (2008) alsousethedatingoftradeliberalisation(abinaryvariable)andfindthattrade liberalisation leads to higher imports. The results in these studies suggest that tariff reductions in Africa are unlikely to lead to a large increase in imports, but are restricted to the aggregate level. There are limitations in the way these studies attempt to identify an effect of tariff reductionson imports.Santos-Paulino (2002)andWuandZheng (2008) use a liberalisation dummy, as is common in the literature, which may be a poor indicator of the actual changes in tariffs. Furthermore, even when tariff measures are used, all of the studies are based on aggregate country-level data, whereas tariffs and reductions vary across products and it seems reasonable to assume that the effects on imports will vary across products. Thus, previous studies either do not observe actual tariff changes or consider only aggregate effects. The data discussed in Section 7.1 permits analysing effects on aggregate and sector imports for five African countries over the period 1996-2004 (precise yearsvaryacrosscountries).DuringtheperiodofstudyAlgeria(in1997),Ethiopia(2001),Egypt(1998),Tanzania(2000)andUganda(2000)liberalisedtheir
‘control’ group or counterfactual. ADiD approach is employed (Section 7.2) to estimate the impact of tariff reductions (the only element of trade liberalisation that can be considered with theavailabledata)onimportsatthegeneralandsector-specificlevel.Section7.3 presents the results comparing the effects on imports for liberalising countries relative to non-liberalising countries, controlling for the timing of liberalisation, trends in import capacity (country effects) and in sector imports across countries (productmarket effects). Section 7.4 concludes by relating the results to concernsaboutreducingtariffs.Dotariffreductionsleadtosignificantincreasesin imports, overall or in particular sectors only, and if so does this undermine domestic production or encourage increased productivity?
