Liberalization, growth and structural change: evidence from Nepalese manufacturing

This paper presents an empirical analysis of the consequences of liberaliza tion on industrial structure in Nepal, a least developed country with weak institutions and severe infrastructure bottlenecks. Results suggest some st ructural change in manufacturing output and trade orientation which appears to be due to a change in incentive structure, but no significant improveme nts were recorded in total factor productivity growth which is of central i mportance for a least developed country like Nepal. Export intensity rose s ignificantly in the postliberalization period despite poor productivity per formance of export-oriented industries while import intensity fell due main ly to improved competitiveness in import competing industries and a fall in imports for smuggling to India.