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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 e..ects. While a trade model with firm heterogeneity can account for the first e..ect, 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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Bibliographic Info

Paper provided by European University Institute in its series Economics Working Papers with number ECO2007/58.

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Date of creation: 2007
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Handle: RePEc:eui:euiwps:eco2007/58

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Keywords: International Trade; Technology Adoption; Productivity;

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References

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Citations

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Cited by:
  1. Ngo Van Long & Horst Raff & Frank Stähler, 2009. "Innovation and Trade with Heterogeneous Firms," CESifo Working Paper Series 2796, CESifo Group Munich.
  2. Omar Licandro & Antonio Navas-Ruiz, 2007. "Trade liberalization, competition and growth," Economics Working Papers we076536, Universidad Carlos III, Departamento de Economía.
  3. Peters, Katrin & Schnitzer, Monika, 2012. "Trade liberalization and credit constraints: Why opening up may fail to promote convergence," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 380, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  4. Aranzazu Crespo Rodríguez, 2012. "Trade, innovation and productivity," Working Papers 2012-06, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
  5. 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).
  6. 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).
  7. 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.
  8. Ariel Burstein & Marc J. Melitz, 2011. "Trade Liberalization and Firm Dynamics," NBER Working Papers 16960, National Bureau of Economic Research, Inc.

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