THE EFFECTS OF TRADE EXPOSURE ON TECHNICAL EFFICIENCY - NEW EVIDENCE FROM THE TURKISH RUBBER INDUSTRY

When a country's foreign trade regime becomes more open, international trade theory suggests that domestic firms face more competition and s tart to operate more efficiently to reduce their production costs. Thi s proposition is empirically examined by using plant-level data from t he Turkish rubber industry during a period of substantial trade libera lization: technical efficiency levels improved significantly when Turk ey's trade regime shifted from a restrictive to a more liberalized one . Incumbent plants located closer to international markets improved te chnical efficiency more than the other plants. These findings suggest that the improvement in technical efficiency was due largely to trade liberalization.