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Trade Liberalization and Productivity Growth

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  • Gustafsson, Peter
  • Segerstrom, Paul

Abstract

This paper presents a trade model with firm-level productivity differences and R&D-driven growth. Trade liberalization causes the least productive firms to exit but also slows the development of new products. The overall effect on productivity growth depends on the size of intertemporal knowledge spillovers in R&D. When these spillovers are relatively weak, then trade liberalization promotes productivity growth in the short run and makes consumers better off in the long run. However, when these spillovers are relatively strong, then trade liberalization retards productivity growth in the short run and makes consumers worse off in the long run.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5894.

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Date of creation: Oct 2006
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Handle: RePEc:cpr:ceprdp:5894

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Related research

Keywords: endogenous fimrs; heterogenous firms; international trade; productivity growth; trade liberalization;

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References

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  1. Andrew B Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2000. "Plants and productivity in international trade," Working Papers 00-08, Center for Economic Studies, U.S. Census Bureau.
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