Trade liberalization and import intensity in the Mongolian manufacturing

This article presents an empirical analysis of the consequences of trade liberalization on import intensity in Mongolia, a ‘least-developed landlocked country’ with weak institutions and severe infrastructure bottlenecks. The theoretical framework employed in modelling is based on industrial organization and international trade literature. Our results suggest that foreign investment stimulates import intensity possibly due to the prevalence of intra-firm trade between subsidies, while the protection of domestic market and state ownership reduces import intensity. There is no statistically significant evidence to suggest that import intensity is lower in unskilled labour-intensive industries. These findings have significant policy implications for further liberalization in order to improve Mongolia’s trade competitiveness.