Markets around the world are becoming more competitive because of changing
operating and regulatory environments. One such change-the loosening of tra
de restrictions-is a macroeconomic policy shift that should have a microeco
nomic impact on industrial efficiency. Specifically, competitive pressure s
hould discipline or eliminate inefficient producers. This article explores
whether or not there is such a dynamic link. It uses a previously unexploit
ed data set to gauge the impact of the 1990 Peruvian reform on plant-level
technical efficiency. The results support the argument that the degree of p
rotection and the level of efficiency are inversely related.