Using a simultaneous equations model, this paper aims to analyse the endogenous relationship among trade liberalisation, inward foreign direct investment and productivity within Australia’s manufacturing sector. Using two-digit quarterly time-series data, from 1988 to 2012, we find empirical support for trade liberalisation as a mechanism for improving productivity within the domestic manufacturing sector. However, we find that inward foreign direct investment has not had a statistically significant impact on productivity within the sector. By drawing on these findings, among others, we make some recommendations for Australia’s international trade, foreign investment and manufacturing industry policies.
JEL classification F14 ; F21 ; O11 Keywords Trade liberalisation ; FDI ; Productivity ; Manufacturing sector ; Australia prs.rt("abs_end"); Corresponding author at: School of Business, University of the Sunshine Coast, Maroochydore DC, QLD 4558, Australia. Tel.: +61 7 5430 1222. 1Tel.: +61 2 6102 9979.
2Tel.: +61 7 4781 1681.
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