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Trade-Revealed TFP

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  • Andrea Finicelli

    ()
    (Bank of Italy)

  • Patrizio Pagano

    ()
    (Bank of Italy)

  • Massimo Sbracia

    ()
    (Bank of Italy)

Abstract

We introduce a novel methodology to measure the relative TFP of the tradeable sector across countries, based on the relationship between trade and TFP in the model of Eaton and Kortum (2002). The logic of our approach is to measure TFP not from its "primitive" (the production function) but from its observed implications. In particular, we estimate TFPs as the productivities that best fit data on trade, production, and wages. Applying this methodology to a sample of 19 OECD countries, we estimate the TFP of each country's manufacturing sector from 1985 to 2002. Our measures are easy to compute and, with respect to the standard development-accounting approach, are no longer mere residuals. Nor do they yield common "anomalies", such as the higher TFP of Italy relative to the US.

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Bibliographic Info

Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 729.

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Date of creation: Oct 2009
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Handle: RePEc:bdi:wptemi:td_729_09

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Keywords: Multi-factor productivity; TFP measurement; Eaton-Kortum model;

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  1. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September.
  2. Francis Kramarz & Jonathan Eaton & Samuel Kortum, 2005. "An Anatomy of International Trade: Evidence from French Firms," 2005 Meeting Papers 197, Society for Economic Dynamics.
  3. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jenson & Samuel Kortum, 2000. "Plants and Productivity in International Trade," NBER Working Papers 7688, National Bureau of Economic Research, Inc.
  4. Serge Shikher, 2012. "Putting industries into the Eaton--Kortum model," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 21(6), pages 807-837, November.
  5. Fernando Alvarez & Robert E. Lucas, 2005. "General Equilibrium Analysis of the Eaton-Kortum Model of International Trade," NBER Working Papers 11764, National Bureau of Economic Research, Inc.
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  7. Finicelli, Andrea & Pagano, Patrizio & Sbracia, Massimo, 2009. "Ricardian selection," MPRA Paper 16950, University Library of Munich, Germany.
  8. Caselli, Francesco, 2004. "Accounting for Cross-Country Income Differences," CEPR Discussion Papers 4703, C.E.P.R. Discussion Papers.
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  14. Paul S. Armington, 1969. "A Theory of Demand for Products Distinguished by Place of Production (Une théorie de la demande de produits différenciés d'après leur origine) (Una teoría de la demanda de productos dis," IMF Staff Papers, Palgrave Macmillan, vol. 16(1), pages 159-178, March.
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  17. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Boston College Working Papers in Economics 593, Boston College Department of Economics.
  18. Lagos, R., 2001. "A Model of TFP," Working Papers 01-08, C.V. Starr Center for Applied Economics, New York University.
  19. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
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  23. Massimo Del Gatto & Gianmarco I. P. Ottaviano & Marcello Pagnini, 2008. "Openness To Trade And Industry Cost Dispersion: Evidence From A Panel Of Italian Firms," Journal of Regional Science, Wiley Blackwell, vol. 48(1), pages 97-129.
  24. Ricardo Lagos, 2006. "A model of TFP," Staff Report 345, Federal Reserve Bank of Minneapolis.
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Cited by:
  1. Michael E. Waugh, 2009. "International trade and income differences," Staff Report 435, Federal Reserve Bank of Minneapolis.
  2. Stefano Bolatto, . "Trade across Countries and Manufacturing Sectors with Heterogeneous Trade Elasticities," Development Working Papers 360, Centro Studi Luca d\'Agliano, University of Milano.
  3. Finicelli, Andrea & Pagano, Patrizio & Sbracia, Massimo, 2009. "Ricardian selection," MPRA Paper 16950, University Library of Munich, Germany.
  4. Shikher, Serge, 2011. "Capital, technology, and specialization in the neoclassical model," Journal of International Economics, Elsevier, vol. 83(2), pages 229-242, March.
  5. Gregory Corcos & Massimo Del Gatto & Giordano Mion & Gianmarco I.P. Ottaviano, 2009. "Productivity and Firm Selection: Quantifying the "New" Gains from Trade," KITeS Working Papers 002, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Mar 2009.
  6. Massimo Del Gatto & Filippo di Mauro & Joseph Gruber & Benjamin R. Mandel, 2011. "The revealed competitiveness of U.S. exports," International Finance Discussion Papers 1026, Board of Governors of the Federal Reserve System (U.S.).
  7. Del Gatto, Massimo & di Mauro, Filippo & Gruber, Joseph & Mandel, Benjamin, 2012. "The structural determinants of the US competitiveness in the last decades: a "trade-revealing" analysis," Working Paper Series 1443, European Central Bank.

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