International Trade and Productivity after Apartheid

Abstract International trade fell in South Africa from the 1970s to the mid-1990s, and climbed fast thereafter, coinciding with the imposition and later removal of apartheid sanctions. Productivity followed suit. This paper explores the extent to which the increase in trade can account for the increase in productivity after apartheid. I use a model of international trade with innovation and calibrate it to match key macroeconomic variables. Non-tariff barriers, mostly related to apartheid sanctions, account for over half the changes in aggregate productivity. Tariffs play a very minor role, in line with existing studies.