Gravity, Productivity and the Pattern of Production and Trade
AbstractThe aggregated incidence of bilateral trade costs is derived from the gravity model. Incidence is equivalent to a TFP penalty. Sectoral and national differences in TFP have sharp implications for the equilibrium pattern of production and trade in a specific factors model of production. Unskilled labor is intersectorally mobile. Skilled labor acquires sector specific skills. Productivity shocks cause incidence shock that induce ex post inefficient allocation of skilled labor. Below (above) average TFP sectors produce less and have below (above) average skill premia. Ex ante efficient allocation is lower in sectors with riskier TFP incidence, despite risk neutrality.
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Bibliographic InfoPaper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 700.
Date of creation: 01 Dec 2008
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gravity model; trade costs; total factor productivity;
Other versions of this item:
- James E. Anderson, 2009. "Gravity, Productivity and the Pattern of Production and Trade," NBER Working Papers 14642, National Bureau of Economic Research, Inc.
- F10 - International Economics - - Trade - - - General
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-02-07 (All new papers)
- NEP-EFF-2009-02-07 (Efficiency & Productivity)
- NEP-INT-2009-02-07 (International Trade)
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