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Trade integration, firm selection and the costs of non-Europe

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Author Info
DEL GATTO, Massimo
MION, Giordano
OTTAVIANO, Gianmarco I.P.

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Abstract

In models with heterogeneous firms trade integration has a positive impact on aggregate productivity through the selection of the best firms as import competition drives the least productive ones out of the market. To quantify the impact of firm selection on productivity, we calibrate and simulate a multi-country multi-sector model with monopolistic competition and variable markups using firm-level data and aggregate trade figures on a panel of 11 EU countries. We find that EU trade has a sizeable impact on aggregate productivity. In 2000 the introduction of prohibitive trade barriers would have caused an average productivity loss of roughly 13 per cent, whereas a reduction of intra-EU trade costs by 5 per cent would have generated a productivity gain of roughly 2 per cent. Productivity losses and gains, however, vary a lot across countries and sectors depending on market accessibility and trade costs. We provide evidence that our results are robust to alternative distance and productivity measures.

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2006061.

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Date of creation: 01 Jun 2006
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Handle: RePEc:cor:louvco:2006061

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Related research
Keywords: European integration; Þrm-level data; Þrm selection; gains from trade; total factor productivity;

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Find related papers by JEL classification:
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
R13 - Urban, Rural, and Regional Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

References listed on IDEAS
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  25. repec:rus:hseeco:122439 is not listed on IDEAS
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Kristian Behrens & Frédéric Robert-Nicoud, 2008. "Survival of the Fittest in Cities: Agglomeration, Selection, and Polarisation," CEP Discussion Papers dp0894, Centre for Economic Performance, LSE. [Downloadable!]
    Other versions:
  2. Behrens, Kristian & Mion, Giordano & Ottaviano, Gianmarco Ireo Paolo, 2007. "Industry Reallocations in a Globalizing Economy," CEPR Discussion Papers 6049, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  3. Hartmut Egger & Peter Egger & James R. Markusen, 2009. "International Welfare and Employment Linkages Arising from Minimum Wages," NBER Working Papers 15196, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Del Gatto, Massimo & Ottaviano, Gianmarco Ireo Paolo & Pagnini, Marcello, 2007. "Openness to Trade and Industry Cost Dispersion: Evidence from a Panel of Italian Firms," CEPR Discussion Papers 6336, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  5. Gabriel J. Felbermayr & Benjamin Jung, . "Sorting It Out: Technical Barriers to Trade and Industry Productivity," FIW Working Paper series 014, FIW. [Downloadable!]
  6. Gianmarco Ottaviano & Daria Taglioni & Filippo di Mauro, 2007. "Deeper, wider and more competitive? Monetary integration, eastern enlargement and competitiveness in the European Union," Working Paper Series 847, European Central Bank. [Downloadable!]
  7. Sebastian Braun, 2009. "Unionisation Structures, Productivity, and Firm Performance," SFB 649 Discussion Papers SFB649DP2009-027, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany. [Downloadable!]
  8. Kristian Behrens & Giordano Mion & Yasusada Murata & Jens Südekum, 2009. "Trade, wages and productivity," Research series 200903-23, National Bank of Belgium. [Downloadable!]
    Other versions:
  9. Hartmut Egger & Udo Kreickemeier, 2007. "Firm Heterogeneity and the Labour Market Effects of Trade Liberalisation," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  10. Gabriel Felbermayr & Julien Prat, 2007. "Product Market Regulation, Firm Selection and Unemployment," IZA Discussion Papers 2754, Institute for the Study of Labor (IZA). [Downloadable!]
  11. M. Pitzalis & Isabella Sulis & Mariano Porcu, 2008. "Differences of Cultural Capital among Students in Transition to University. Some First Survey Evidences," Working Paper CRENoS 200805, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia. [Downloadable!]
  12. Gerardo Marletto, 2007. "Crossing The Alps: Three Transport Policy Options," Working Paper CRENoS 200712, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia. [Downloadable!]
  13. G. Corcos & Massimo Del Gatto & G. Mion & GIP. Ottaviano, 2007. "Productivity and Firm Selection: Intra- vs International Trade," Working Paper CRENoS 200706, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia. [Downloadable!]
    Other versions:
  14. Toshihiro Okubo & Pierre M. Picard & Jacques-François Thisse, 2008. "The spatial selection of heterogeneous firms," Discussion Paper Series 229, Research Institute for Economics & Business Administration, Kobe University. [Downloadable!]
    Other versions:
  15. Isabella Sulis & Mariano Porcu, 2008. "Assessing the Effectiveness of a Stochastic Regression Imputation Method for Ordered Categorical Data," Working Paper CRENoS 200804, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia. [Downloadable!]
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