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Technology adoption and the selection effect of trade

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  • Antonio Navas-Ruiz

    ()

  • Davide Sala

    ()

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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  1. Tybout, James, 1998. "Manufacuring firms in developing countries - how well do they do, and why?," Policy Research Working Paper Series 1965, The World Bank.
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  16. Sourafel Girma & David Greenaway & Richard Kneller, 2004. "Does Exporting Increase Productivity? A Microeconometric Analysis of Matched Firms," Review of International Economics, Wiley Blackwell, vol. 12(5), pages 855-866, November.
  17. Blundell, Richard & Griffith, Rachel & Van Reenen, John, 1995. "Dynamic Count Data Models of Technological Innovation," Economic Journal, Royal Economic Society, vol. 105(429), pages 333-44, March.
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Cited by:
  1. Aranzazu Crespo Rodríguez, 2012. "Trade, innovation and productivity," Working Papers 2012-06, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
  2. Ariel Burstein & Marc J. Melitz, 2011. "Trade Liberalization and Firm Dynamics," NBER Working Papers 16960, National Bureau of Economic Research, Inc.
  3. Omar Licandro & Antonio Navas-Ruiz, 2007. "Trade liberalization, competition and growth," Economics Working Papers we076536, Universidad Carlos III, Departamento de Economía.
  4. Antonio Navas Ruiz, 2012. "Asymmetric trade liberalization, sector heterogeneity and industry productivity growth," Working Papers. Serie AD 2012-09, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  5. Antonio Navas Ruiz, 2013. "Asymmetric trade liberalisation, sector heterogeneity andinnovation," FIW Working Paper series 127, FIW.
  6. Antonio Navas & Davide Sala, 2013. "Innovation and Trade Policy Coordination: the Role of Firm Heterogeneity," Working Papers 2013017, The University of Sheffield, Department of Economics.
  7. Peters, Katrin & Schnitzer, Monika, 2012. "Trade liberalization and credit constraints: Why opening up may fail to promote convergence," CEPR Discussion Papers 8942, C.E.P.R. Discussion Papers.
  8. Ngo Van Long & Horst Raff & Frank Stähler, 2008. "Innovation and Trade with Heterogeneous Firms," Kiel Working Papers 1430, Kiel Institute for the World Economy.
  9. Julian P. Christ & Patricia Hofmann, 2010. "International Openness and Patent Activity: First Descriptive Results Very preliminary draft," DEGIT Conference Papers c015_055, DEGIT, Dynamics, Economic Growth, and International Trade.
  10. Navas, Antonio, 2012. "Asymmetric trade liberalization, sector heterogeneity and Innovation," Working Papers in Economic Theory 2012/05, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History).

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