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Gains from trade and measured total factor productivity

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  • Ferreira, Pedro Cavalcanti
  • Trejos, Alberto
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    Abstract

    We develop and calibrate a model where di¤erences in factor en-dowments lead countries to trade di¤erent goods, so that the existenceof international trade changes the sectorial composition of output fromone country to another. Gains from trade re ect in total factor produc-tivity. We perform a development decomposition, to assess the impactof trade and barriers to trade on measured TFP. In our sample, themedian size of that e¤ect is about 6.5% of output, with a median of17% and a maximum of 89%. Also, the model predicts that changes inthe terms of trade cause a change of productivity, and that e¤ect hasan average elasticity of 0.71.

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    Bibliographic Info

    Paper provided by FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil) in its series Economics Working Papers (Ensaios Economicos da EPGE) with number 711.

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    Date of creation: 31 May 2010
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    Handle: RePEc:fgv:epgewp:711

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    1. Robert J. Barro & Jong-Wha Lee, 2000. "International Data on Educational Attainment: Updates and Implications," CID Working Papers, Center for International Development at Harvard University 42, Center for International Development at Harvard University.
    2. Fernando Alvarez & Robert E. Lucas, 2005. "General Equilibrium Analysis of the Eaton-Kortum Model of International Trade," NBER Working Papers, National Bureau of Economic Research, Inc 11764, National Bureau of Economic Research, Inc.
    3. Timothy J. Kehoe & Kim J. Ruhl, 2007. "Are Shocks to the Terms of Trade Shocks to Productivity?," NBER Working Papers, National Bureau of Economic Research, Inc 13111, National Bureau of Economic Research, Inc.
    4. Robert C. Feenstra & Alan Heston & Marcel P. Timmer & Haiyan Deng, 2004. "Estimating Real Production and Expenditures Across Nations: A Proposal for Improving the Penn World Tables," NBER Working Papers, National Bureau of Economic Research, Inc 10866, National Bureau of Economic Research, Inc.
    5. Diego Restuccia & Richard Rogerson, 2008. "Policy Distortions and Aggregate Productivity with Heterogeneous Plants," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 707-720, October.
    6. Ferreira Pedro C. & Pessoa Samuel A & Veloso Fernando A, 2008. "The Evolution of International Output Differences (1970-2000): From Factors to Productivity," The B.E. Journal of Macroeconomics, De Gruyter, De Gruyter, vol. 8(1), pages 1-34, February.
    7. Felipe Meza & Erwan Quintin, 2005. "Financial crises and total factor productivity," Center for Latin America Working Papers, Federal Reserve Bank of Dallas 0105, Federal Reserve Bank of Dallas.
    8. Timothy J. Kehoe & Kim J. Ruhl, 2008. "Sudden Stops, Sectoral Reallocations, and the Real Exchange Rate," NBER Working Papers, National Bureau of Economic Research, Inc 14395, National Bureau of Economic Research, Inc.
    9. Timothy J. Kehoe & Kim Ruhl, 2008. "Data Appendix to "Are Shocks to the Terms of Trade Shocks to Productivity?"," Technical Appendices, Review of Economic Dynamics 07-40, Review of Economic Dynamics.
    10. Summers, Robert & Heston, Alan, 1991. "The Penn World Table (Mark 5): An Expanded Set of International Comparisons, 1950-1988," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 106(2), pages 327-68, May.
    11. Daron Acemoglu & Veronica Guerrieri, 2008. "Capital Deepening and Nonbalanced Economic Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 116(3), pages 467-498, 06.
    12. Patrick J. Kehoe & Timothy J. Kehoe, 1994. "Capturing NAFTA's impact with applied general equilibrium models," Quarterly Review, Federal Reserve Bank of Minneapolis, Federal Reserve Bank of Minneapolis, issue Spr, pages 17-34.
    13. Andres Rodriguez-Clare, 2007. "Trade, Diffusion and the Gains from Openness," NBER Working Papers, National Bureau of Economic Research, Inc 13662, National Bureau of Economic Research, Inc.
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