Productivity, firm size and trade liberalization in a partner country: Evidence from Korean firm-level data

- The impact of partner country's trade liberalization on productivity is examined.
- Impacts are analyzed by firm-size distribution.
- A reduction in China's tariffs induces Korean firms above median size to increase their TFP.
- The effect of any given tariff reduction is highest in the uppermost quartile.

In this paper, I study the impact of partner-country tariffs on Korean firm-level productivity for the period from 2005 to 2009. I start by documenting that the rates at which total factor productivity, spending on technology, number of exporting firms, and exports grow are increasing with firm size. My results show that a reduction in China's tariffs induces Korean firms above median size to increase their productivity. Also, I find that the effect of any given tariff reduction is highest in the uppermost quartile of the firm-size distribution.