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Technology adoption and the selection effect of trade

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Author Info
Antonio Navas-Ruiz ()
Davide Sala ()

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Abstract

The reallocation of output across plants and the productivity growth at individual plants are both important sources of productivity growth at the industry level. Recent evidence has shown that trade liberalization is related to both effects. While a trade model with firm heterogeneity can account for the first effect, it can not explain the second effect. We add to this model the option for firms to costly adopt more productive technologies and show that plant productivity actually rises in response to lower trade costs. Following trade liberalization, selection into exporting raises the market share only for some exporters. Therefore, a greater scale of operation amplifies their return from costly productivity-enhancement investments and leads a greater proportion of them to implement a more innovative technology.

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Paper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we076737.

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Date of creation: Aug 2007
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Handle: RePEc:cte:werepe:we076737

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  7. Bernard, Andrew B. & Jensen, J. Bradford & Schott, Peter K., 2006. "Trade costs, firms and productivity," Journal of Monetary Economics, Elsevier, vol. 53(5), pages 917-937, July. [Downloadable!] (restricted)
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  12. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2003. "Plants and Productivity in International Trade," American Economic Review, American Economic Association, vol. 93(4), pages 1268-1290, September. [Downloadable!]
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  13. Richard E. Baldwin & Frédéric Robert-Nicoud, 2006. "Trade and Growth with Heterogenous Firms," NBER Working Papers 12326, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  14. Helpman, Elhanan & Melitz, Marc J & Yeaple, Stephen R, 2003. "Export versus FDI," CEPR Discussion Papers 3741, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  15. Fritsch, M. & Meschede, M., 1998. "Product Innovation, Process Innovation, and Size," Papers 98/13, Bergakademie Freiberg, Faculty of Economics and Business Administration.
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  16. Stähler, Frank & Raff, Horst & Long, Ngo Van, 2007. "The Effects of Trade Liberalization on Productivity and Welfare: The Role of Firm Heterogeneity, R&D and Market Structure," Economics Working Papers 2007,20, Christian-Albrechts-University of Kiel, Department of Economics. [Downloadable!]
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  18. Baldwin, John R. & Gu, Wulong, 2004. "Innovation, Survival and Performance of Canadian Manufacturing Plants," Economic Analysis (EA) Research Paper Series 2004022e, Statistics Canada, Analytical Studies Branch. [Downloadable!]
  19. Cohen, Wesley M & Klepper, Steven, 1996. "Firm Size and the Nature of Innovation within Industries: The Case of Process and Product R&D," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 232-43, May. [Downloadable!] (restricted)
  20. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  21. Yeaple, Stephen Ross, 2005. "A simple model of firm heterogeneity, international trade, and wages," Journal of International Economics, Elsevier, vol. 65(1), pages 1-20, January. [Downloadable!] (restricted)
  22. Sourafel Girma & David Greenaway & Richard Kneller, 2004. "Does Exporting Increase Productivity? A Microeconometric Analysis of Matched Firms," Review of International Economics, Blackwell Publishing, vol. 12(5), pages 855-866, November. [Downloadable!] (restricted)
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  24. Daniel Trefler, 2004. "The Long and Short of the Canada-U. S. Free Trade Agreement," American Economic Review, American Economic Association, vol. 94(4), pages 870-895, September. [Downloadable!]
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  25. Marc J. Melitz & Gianmarco I.P. Ottaviano, 2005. "Market Size, Trade, and Productivity," NBER Working Papers 11393, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  26. Cohen, Wesley M & Klepper, Steven, 1996. "A Reprise of Size and R&D," Economic Journal, Royal Economic Society, vol. 106(437), pages 925-51, July. [Downloadable!] (restricted)
  27. Baldwin, John R. & Gu, Wulong, 2003. "Participation in Export Markets and Productivity Performance in Canadian Manufacturing," Economic Analysis (EA) Research Paper Series 2003011e, Statistics Canada, Analytical Studies Branch. [Downloadable!]
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