IDEAS home Printed from https://ideas.repec.org/p/bde/wpaper/1835.html
   My bibliography  Save this paper

Faraway, so close! technology diffusion and firm heterogeneity in the medium term cycle of advanced economies (Updated May 2019)

Author

Listed:
  • Mónica Correa-López

    (Banco de España)

  • Beatriz de Blas

    (Universidad autónoma de Madrid)

Abstract

Large US firms, by diffusing embodied technology through trade in intermediates, appear to drive Europe’s output over the medium term. We develop a two-country model of endogenous growth in varieties, cross-country firm heterogeneity and trade to match this evidence. A US TFP slowdown generates a pronounced recession in Europe, while a negative investment-specific shock also imparts a protracted recession in the US, since GDP and firm productivity stay below trend beyond a decade. Heterogeneous firms, with endogenously changing productivity cut-offs, and the responses of innovators and adopters determine medium-term adjustment, as import switching processes unfold.

Suggested Citation

  • Mónica Correa-López & Beatriz de Blas, 2018. "Faraway, so close! technology diffusion and firm heterogeneity in the medium term cycle of advanced economies (Updated May 2019)," Working Papers 1835, Banco de España, revised May 2019.
    • Handle: RePEc:bde:wpaper:1835
    as

    Download full text from publisher

    File URL: https://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/18/Files/dt1835e.pdf
    File Function: Updated version, May 2019
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Fabio Ghironi & Marc J. Melitz, 2005. "International Trade and Macroeconomic Dynamics with Heterogeneous Firms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(3), pages 865-915.
    2. Jonathan Eaton & Samuel Kortum & Francis Kramarz, 2011. "An Anatomy of International Trade: Evidence From French Firms," Econometrica, Econometric Society, vol. 79(5), pages 1453-1498, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yuko Imura, 2023. "Reassessing Trade Barriers with Global Production Networks," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 77-116, December.
    2. Giri, Rahul, 2012. "Local costs of distribution, international trade costs and micro evidence on the law of one price," Journal of International Economics, Elsevier, vol. 86(1), pages 82-100.
    3. Hartmut Egger & Udo Kreickemeier, 2017. "Fairness, Trade, and Inequality," World Scientific Book Chapters, in: International Trade and Labor Markets Welfare, Inequality and Unemployment, chapter 12, pages 339-380, World Scientific Publishing Co. Pte. Ltd..
    4. Chaney, Thomas, 2016. "Liquidity constrained exporters," Journal of Economic Dynamics and Control, Elsevier, vol. 72(C), pages 141-154.
    5. Tarasov, Alexander, 2012. "Per capita income, market access costs, and trade volumes," Journal of International Economics, Elsevier, vol. 86(2), pages 284-294.
    6. Ye, Zhiqiang & Zhang, Fangfang & Zhang, Shunming, 2021. "Export effect and influence mechanism of foreign ownership," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 258-276.
    7. Gumpert, Anna & Li, Haishi & Moxnes, Andreas & Ramondo, Natalia & Tintelnot, Felix, 2020. "The life-cycle dynamics of exporters and multinational firms," Journal of International Economics, Elsevier, vol. 126(C).
    8. Roc Armenter & Miklós Koren, 2015. "Economies Of Scale And The Size Of Exporters," Journal of the European Economic Association, European Economic Association, vol. 13(3), pages 482-511, June.
    9. Auray, Stéphane & Eyquem, Aurélien & Ma, Xiaofei, 2017. "Competitive tax reforms in a monetary union with endogenous entry and tradability," European Economic Review, Elsevier, vol. 98(C), pages 126-143.
    10. Schröder, Philipp J.H. & Sørensen, Allan, 2012. "Firm exit, technological progress and trade," European Economic Review, Elsevier, vol. 56(3), pages 579-591.
    11. Łukasz Matuszczak, 2019. "Międzynarodowy handel usługami polskich przedsiębiorstw," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 1, pages 47-67.
    12. Eduardo Morales & Gloria Sheu & Andrés Zahler, 2014. "Gravity and Extended Gravity: Using Moment Inequalities to Estimate a Model of Export Entry," NBER Working Papers 19916, National Bureau of Economic Research, Inc.
    13. Julian Giovanni & Andrei A. Levchenko & Francesc Ortega, 2015. "A Global View Of Cross-Border Migration," Journal of the European Economic Association, European Economic Association, vol. 13(1), pages 168-202, February.
    14. Andrew Atkeson & Ariel Burstein, 2008. "Pricing-to-Market, Trade Costs, and International Relative Prices," American Economic Review, American Economic Association, vol. 98(5), pages 1998-2031, December.
    15. Fabio Ghironi & Marc J. Melitz, 2007. "Trade Flow Dynamics with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 97(2), pages 356-361, May.
    16. Nguyen, Daniel X., 2012. "Demand uncertainty: Exporting delays and exporting failures," Journal of International Economics, Elsevier, vol. 86(2), pages 336-344.
    17. Julian di Giovanni & Andrei A. Levchenko & Isabelle Mejean, 2024. "Foreign Shocks as Granular Fluctuations," Journal of Political Economy, University of Chicago Press, vol. 132(2), pages 391-433.
    18. Ziran Ding, 2022. "Firm heterogeneity, variable markups, and multinational production: A review from trade policy perspective," Journal of Economic Surveys, Wiley Blackwell, vol. 36(5), pages 1311-1357, December.
    19. Breinlich, Holger & Cuñat, Alejandro, 2010. "Trade liberalization and heterogeneous firm models: an evaluation using the Canada - US Free Trade Agreement," LSE Research Online Documents on Economics 28725, London School of Economics and Political Science, LSE Library.
    20. Melitz, Marc J. & Redding, Stephen J., 2014. "Heterogeneous Firms and Trade," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 1-54, Elsevier.

    More about this item

    Keywords

    international business cycles; heterogeneous firms; embodied growth; trade;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bde:wpaper:1835. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ángel Rodríguez. Electronic Dissemination of Information Unit. Research Department. Banco de España (email available below). General contact details of provider: https://edirc.repec.org/data/bdegves.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.